Kevin Buckland and Chibuike Ogu
TOKYO (Reuters) – A global bond rout that has weighed on stocks and bolstered the safe-haven U.S. dollar showed signs of slowing on Thursday even as Japanese bond yields hit new multi-year highs.
However, equity selling continued, with most Asian stock indexes lower in early trading. The dollar remained stable and oil prices fell.
The benchmark slipped to 4.6749% in the latest session, retreating from an overnight high of 4.73%, its peak since April 2024.
Yields on equivalent-maturity Japanese government bonds started the day 1 basis point higher at 1.185%, their highest since May 2011, but were unchanged as of 0202 GMT.
Australian government bond yields on the same date hit Wednesday’s highest since late November at 4.546% in early trading, but were last at 4.521%, down just 1 bps. higher than the previous day’s close.
Whether global bond markets can remain calm may depend on what happens to British bonds later in the day, which were at the center of a sell-off as analysts spoke of a growing crisis of confidence in Britain’s economic and financial health despite no obvious reason to falls. The 10-year government bond yield rose 20 bp this week.
“Some have talked about the possibility of re-airing the mini-budget Truss/Kwarteng episode that led to such dramatic scenes in the UK gold alloys in September 2022,” said Chris Weston, head of research at Pepperstone.
“There is clearly reason to watch the UK bond market closely and the recent trend is certainly a cause for concern,” he said. “However, we can be confident that the BoE (Bank of England) is more prepared this time.”
Sterling remained steady at $1.23625 after falling 0.9% on Wednesday.
The index, which compares the currency against sterling, the euro and four other major currencies, was little changed at 109, close to its highest level since November 2022 of 109.54 hit a week ago.
U.S. dollar and U.S. Treasury yields received an extra boost from recent signs of economic strength and inflation resilience, sending market rates lower by the amount of Federal Reserve policy easing this year.
Minutes from the Federal Reserve’s December meeting released Wednesday showed officials were concerned that President-elect Donald Trump’s proposed tariffs and immigration policies could prolong the battle against rising prices.
Selling of Treasuries accelerated Wednesday after CNN reported that Trump was considering declaring a national economic emergency to provide legal justification for a series of sweeping levies on allies and adversaries.
Markets only fully price in one 25 bps rate cut. in 2025 and see the likelihood of a second decline at about 60%.
All of this combined to leave global stock market sentiment fragile, with Asian shares largely in the red on Thursday morning.
fell 0.7%, Australian shares fell 0.6% and Taiwanese shares lost 0.2%.
Hong Kong’s Hang Sang was little changed, while mainland blue chips fell 0.2%.
The US showed a 0.2% decline after the cash index rose 0.2% overnight.
Stock markets in the US will be closed on Thursday and Treasuries will hold a shortened session to mark a national day of mourning for former President Jimmy Carter.
On Friday, a closely watched monthly jobs report will provide potentially important clues about the Fed’s policy outlook.
Oil prices fell for a second session, pressured by a stronger dollar and a significant increase in US fuel inventories last week.
fell 39 cents to $75.77 per barrel. West Texas Intermediate crude fell 39 cents to $72.93.
Gold prices fell 0.1% to about $2,658 an ounce, retreating from an overnight high of $2,670.10, their peak since Dec. 13.
Leading cryptocurrency Bitcoin remained steady at around $94,965 after a two-day decline of 7%.