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Friday, March 24, 2023

Bonds Under Pressure as Global Stocks Sell-Off Deepens

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Government bonds and global stocks were under pressure in Asian trading on Friday following a steep sell-off in US treasuries as investors grappled with rising inflation fears.

The yield on the 10-year US Treasury fell 0.03 percentage points in afternoon trading in Asia on Friday to 1.492 per cent.

That marked a slight recovery from US trading on Thursday, when the yield shot up as much as 0.23 percentage points to above 1.5 per cent for the first time in over a year.

Bond prices rise when yields fall.

In Australia, the yield on 10-year government bonds surged 0.12 percentage points on Friday to 1.849 per cent, its highest level since April 2019.

Selling early in the session in Tokyo had sent yields on Japan’s benchmark 10-year government bond to 0.178 per cent — the highest level since the Bank of Japan announced it would introduce a negative interest rate policy in early 2016.

The yield later stabilised at 0.141 per cent.

The volatility on Friday came as concerns grew among investors that the worldwide economic recovery from the Covid-19 pandemic could generate inflationary pressures, causing the US and other central banks to tighten monetary policies.

Overnight in the US, concerns over inflation rippled through Wall Street.

The tech-heavy Nasdaq stock index suffered its worst day since October, falling 3.5 per cent, while the S&P 500 dropped 2.5 per cent. S&P 500 futures were down 0.3 per cent on Friday afternoon in Asia.

London’s FTSE 100 futures fell 1.3 per cent. Investors’ focus is turning to how central banks will react to surging bond yields and concerns over asset price bubbles.

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