Key facts
- Asian shares were flat on Friday as a persistent bond selloff pushed US Treasury yields to multi-year highs.
- The 10-year US Treasury yield rose to 5.1915%, and the 30-year yield climbed to 5.4805%.
- Oil prices eased slightly to $105.75 a barrel.
- The US dollar strengthened against major peers.
- Norway raised interest rates, while Sweden signaled a potential hike.
- US President Donald Trump and Chinese President Xi Jinping are meeting amid geopolitical tensions.
Asian shares were largely flat on Friday as a relentless selloff in global bonds pushed longer-dated US Treasury yields to two-decade highs, increasing borrowing costs worldwide and threatening equity valuations. Brent crude oil eased slightly to $105.75 a barrel after recent gains, but inflation fears persist.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, with major markets like China, Taiwan, and South Korea closed for holidays. Japan's Nikkei rose 1%, while Australia's resources-heavy shares fell 0.6% and Hong Kong's Hang Seng index declined 1%.
The benchmark 10-year US Treasury yield rose 1 basis point to 5.1915%, having surged to a 19-year peak of 5.2251% earlier in the week. The 30-year US bond yield climbed 2 basis points to 5.4805%, its highest level since 2004. In Asia, Japan's 10-year government bond yields rose 4 basis points to 3.115%, the highest since 1996, and Australia's 10-year yields also increased by 4 basis points to 5.408%.
Fed funds futures now imply a 71% chance of another US Federal Reserve rate hike next month, up from 53% earlier in the week. The US 2-year yields were steady at 4.9035%. The Federal Reserve's recent rate hike is influencing other central banks, with Norway's Norges Bank raising rates and Sweden's Riksbank signaling a potential follow-up. Mexico's Banxico held rates steady but altered its forward guidance.
The US dollar strengthened, rising 1% this week to 101.25 against major peers. Markets are watching for potential developments from the meeting between US President Donald Trump and Chinese President Xi Jinping, though significant breakthroughs on contentious issues are not widely expected. Hopes for a truce between the US and Iran are also being monitored.