Asian markets traded unevenly on Tuesday as investors absorbed another rise in oil prices and a sharp global bond selloff that pushed the U.S. 10-year Treasury yield to its highest level in 19 years.
The benchmark U.S. yield reached about 5.27%, while the two-year yield moved close to 5%. The rise in sovereign borrowing costs has spilled into bond markets across Japan, South Korea and Australia, increasing pressure on equities and other risk assets.
Higher rates reshape global asset prices
Investors are increasingly pricing in a longer period of restrictive monetary policy. Expectations for additional Federal Reserve rate increases have strengthened as elevated oil prices threaten to keep inflation above target.
Higher government yields raise financing costs for companies, households and governments. They also make bonds more competitive with equities, particularly growth stocks whose valuations depend heavily on future earnings.
Oil and China tech add to pressure
Brent crude remained above $100 a barrel as uncertainty around Middle East supply continued. Chinese technology shares were also under pressure amid concern over possible new U.S. restrictions on Chinese components.
The Australian dollar held firm ahead of a closely watched Reserve Bank of Australia decision, while the yen gained modestly after U.S. and Japanese officials reiterated concern about excessive currency moves.
Sources: Reuters global markets coverage and market data.
