Asian bonds declined and the US dollar remained under pressure on Aug 21 after a rally in Treasuries faded, with investors betting that US efforts to contain borrowing costs through buybacks may offer only a temporary reprieve.
Bonds in Australia and New Zealand opened lower after 30-year US bond yields rose on Aug 20 even as US Treasury Secretary Scott Bessent flagged scope for larger debt buybacks and an upcoming fiscal plan.
The yield climbed six basis points to close the session at 5.25 per cent, recouping most of the decline sparked by the Treasury’s surprise decision to increase buybacks of long-dated bonds. The 10-year yield erased its losses to close at 4.70 per cent.
Elsewhere, Asian stocks followed Wall Street lower with MSCI’s Asia-Pacific equities gauge falling 0.2 per cent. Earlier, the S&P 500 Index dropped 0.9 per cent, with Walmart sinking the most since 2022 after disappointing sales. The Nasdaq 100 fell 0.7 per cent for a fifth straight loss.
Some relief for markets came early on Aug 21 with Brent slipping 0.7 per cent to US$93.10 a barrel. The commodity had rallied for five days as President Donald Trump threatened Iran with “economic warfare” and said Tehran had failed to accept a deal.
The moves in bonds extended a volatile stretch on Wall Street as a series of Treasury decisions underscored growing concern over elevated long-term yields.
Lofty government financing costs are feeding through to the broader economy and weighing on equities, after years of elevated inflation and government spending.
While traders initially cheered Wednesday’s move, the enthusiasm did not last long because it does not address the overarching reasons for the rise in yields, said Mark Malek, chief investment officer of Muriel Siebert & Co.
“It was just a housekeeping move destined to be short-term, at best,” he said.
In other corners of the market, the yen stayed steady after Japan’s key price gauge accelerated for a second month, keeping the Bank of Japan on track for another near-term interest rate hike as market speculation builds over a move as soon as September.
The yen traded around 158.90 per US dollar after sliding past the 159 level in the prior session.
A Bloomberg gauge of the US dollar’s strength edged lower early on Aug 21, while gold steadied around US$4,530 an ounce.
Bitcoin surpassed US$70,000 for the first time in over two months after a high-stakes meeting Trump held with crypto industry leaders. The original crypto currency traded at about US$72,600 early on Aug 21.
Early attention in Asia is also on technology stocks. Samsung Electronics plans to announce on Aug 21 a new shareholder return package that could be worth as much as 110 trillion won (S$101 billion), according to a person familiar with the matter.
Meanwhile, Bessent played down Thursday’s market moves, saying “anything that happens within a 24-hour period is noise”. He also said the expanded buyback operations “could be more than the US$4 billion (S$5 billion)” size planned to start in September.
Market participants are warning that a lack of predictability when it comes to the US Treasury’s debt management strategy could ultimately portend higher borrowing costs.
Investors and analysts at JPMorgan Chase and Co, Jefferies and PGIM say that surprises stand to increase term premium, or the extra compensation demanded in the market to offset potential risks, on US government debt.
“My view is that the ‘Bessent put’ is still going to fail to keep yields down from multi-decade highs over the longer term,” said Hardika Singh at Fundstrat Global Advisors.
“Making yields go down over the longer period will require the painful work of bringing down the debt.” Bloomberg
Source : https://www.straitstimes.com/business/asian-bonds-follow-us-treasuries-lower-dollar-slips
