Asian Bonds Follow Treasuries Lower, Oil Gains: Markets Wrap

(Bloomberg) — Asian bonds followed Treasuries lower as concerns over government finances mounted, while higher oil prices added to fears that inflation will quicken.

Sovereign bonds in Australia and New Zealand dropped, while yields on Japan’s 10-year debt extended gains after climbing to multi-decade highs on Monday. Treasury 30-year yields rose to 5.32%, a level last seen in June 2007.

Oil prices advanced as prospects for peace in the Middle East dimmed, reviving concern that prolonged geopolitical tensions will threaten supplies and keep energy costs elevated. Global benchmark Brent rose 0.3% to $91.10 a barrel after President Donald Trump said he wasn’t interested in extending the expiring agreement with Iran and fighting flared anew in Lebanon.

“The combination of elevated oil prices, higher Treasury yields and renewed geopolitical risk is likely to keep markets volatile, with traders remaining particularly sensitive to any further updates from the Middle East,” Nick Twidale, chief market analyst at AT Global Markets, wrote in a note

The rise in US Treasury yields reflected investor angst over surging government spending, a flood of long-dated debt sales and inflation that has remained above the Federal Reserve’s target for the past five years. Traders are stepping up their scrutiny of bond markets even after two benign US inflation readings this month prompted them to pare bets on a Fed interest-rate increase next month.

Renewed tensions in the Middle East and the recent rally in oil prices are also reviving inflation concerns as prospects for a peace deal between the US and Iran fade, raising fresh questions over the reopening of the vital Strait of Hormuz.

Elsewhere, Asian stocks erased earlier gains with MSCI’s regional gauge falling 0.1%. Shares in South Korea climbed 1.2% as traders returned after a holiday on Monday. Earlier, chipmakers notched gains in US trading as details of Anthropic PBC’s surging sales growth stoked bullish sentiment around AI, even as the broader market declined.

A Bloomberg gauge of the dollar edged lower after dropping to the weakest level since May on Monday.

Gold extended a two-week advance as easing expectations for Fed rate hikes put downward pressure on the dollar, making bullion cheaper for most buyers. Gold traded around $4,425 an ounce.

China’s 10-year bond futures rose to a record after data on Monday showed the nation’s economic slowdown worsened at the start of the second half of the year.

The yield on the US Treasury 10-year note was little changed at 4.72% after rising three basis points Monday.

“US Treasuries continue to trade with a heavy tone — likely more to come,” Padhraic Garvey, regional head of research, Americas at ING Groep NV, wrote in a note. “It’s a slow grind, but the net direction remains up in yield, and in particular in long yields.”

Meanwhile, foreign holdings of Treasuries fell in June from the previous month, led by declines in the stockpiles owned by Japan and China.

Traders are also focused on the Middle East.

Asked whether he would seek an extension of the memorandum of understanding signed in June — which technically expires Monday — Trump told reporters, “No.” That truce was meant to give Washington and Tehran a window to reach a more lasting peace deal within 60 days.

“The situation in the Middle East is unsettling, and the yield on the US 10-year note has pushed back above 4.7%,” said Matt Maley, chief market strategist at Miller Tabak + Co. “With long-term yields remaining elevated even after last week’s benign inflation data, it is something that is creating some headwinds for investors.”

Corporate Highlights:

BHP Group’s profit rose by almost a third as buoyant commodity prices lifted earnings, with full-year revenue from copper overtaking iron ore for the first time. Nvidia Corp. has agreed to spend as much as $105 billion to support a massive new data center campus in Ohio set to be leased by OpenAI. RTX Corp. won a contract valued at $23 billion from the US Navy to accelerate production of more than 7,000 Tomahawk cruise missiles. Berkshire Hathaway Inc. increased its holdings in Delta Air Lines Inc. and Google parent Alphabet Inc. as Greg Abel began tapping into the company’s massive cash hoard.

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.1% as of 10:54 a.m. Tokyo time Nikkei 225 futures (OSE) fell 1.3% Japan’s Topix fell 0.3% Australia’s S&P/ASX 200 rose 0.1% Hong Kong’s Hang Seng fell 0.6% The Shanghai Composite was little changed Euro Stoxx 50 futures fell 0.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1581 The Japanese yen was little changed at 159.47 per dollar The offshore yuan was little changed at 6.7443 per dollar Cryptocurrencies

Bitcoin fell 0.4% to $64,112.76 Ether fell 0.3% to $1,899.38 Bonds

The yield on 10-year Treasuries was little changed at 4.73% Japan’s 10-year yield advanced 1.5 basis points to 2.935% Australia’s 10-year yield advanced three basis points to 5.07% Commodities

West Texas Intermediate crude rose 0.4% to $84.87 a barrel Spot gold fell 0.2% to $4,406.61 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Ruth Carson and Winnie Hsu.

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