On Wednesday, Asia-Pacific markets witnessed a downturn as investors navigated the effects of rising bond yields and heightened geopolitical tensions. This followed a statement from U.S. President Donald Trump, who revealed that he had been “an hour away” from launching an attack on Iran, before opting to delay the action by a few days.
Earlier in the session, yields on U.S. Treasurys briefly reached 5.197%, their highest since July 2007. This surge came as investors offloaded bonds amid renewed fears of inflation. The yield on the longer-term 30-year Treasury bond was last observed trading slightly lower at 5.173%, down by almost 1 basis point.
In Japan, the yields on super-long government bonds saw a slight decrease on Wednesday. The yield on the 30-year Japanese government bond fell over 9 basis points to 4.068%, following record highs earlier in the week. However, shorter-term Japanese debt remained pressured, with the 5-year JGB yield climbing to a record 2.041%.
Masahiko Loo from State Street commented on the situation, noting that the record-high yields on Japanese government bonds are contributing to a global “duration reset.” Despite this, he emphasized that the shift is expected to gradually tighten global financial conditions rather than cause systemic stress.
Loo pointed out that while the increase in JGB yields might affect duration-sensitive assets and raise global borrowing costs, this repricing should be seen as part of a broader adjustment within bond markets, rather than a funding shock specific to Japan. He highlighted that Japan’s debt market remains largely supported by domestic financing and substantial household savings.
While higher JGB yields could weigh on duration-sensitive assets and raise global borrowing costs, Loo said the repricing remains part of a broader adjustment in bond markets rather than a Japan-specific funding shock. He noted that Japan’s debt market is still largely domestically financed and underpinned by massive household savings buffers.
Japan’s Nikkei 225 lost 1.23% to 59,804.41 while the Topix declined 1.53% to 3,791.65. South Korea’s Kospi fell 0.86% to 7,208.95 while the small-cap Kosdaq dropped 2.61% to 1,056.07. Shares of Samsung Electronics edged 0.18% higher even as wage talks between the company and the workers broke down, with more than 47,000 employees now set to go on strike Thursday.
In Australia, the S&P/ASX 200 lost 1.26% to 8,496.6.
Hong Kong’s Hang Seng index slid 0.57%, and the mainland’s CSI 300 closed flat.
U.S. stock futures ticked slightly higher. S&P 500 futures added 0.14%, while Nasdaq 100 futures added 0.25%. Futures tied to the Dow Jones Industrial Average rose 55 points, or 0.11%.
Overnight on Wall Street, stocks closed lower with the S&P 500 posting its third straight losing session, as a jump in bond yields threatened the bull market.
The S&P 500 closed down 0.67%, ending at 7,353.61, while the Nasdaq Composite finished 0.84% lower at 25,870.71. The Dow Jones Industrial Average shed 322.24 points, or 0.65%, to close at 49,363.88.
— CNBC’s Sean Conlon, Sarah Min and Lisa Kailai Han contributed to this report
