Asian Bonds to Decline as Oil Fans Inflation Fears: Markets Wrap
(Bloomberg) — Asian bonds looked set to track Treasuries lower as the US-Iran standoff kept oil prices elevated, adding to inflation concerns and bets on further Federal Reserve interest-rate hikes.
New Zealand government bonds opened lower, while futures pointed to losses for Australian debt after Treasury yields surged across maturities. The benchmark 10-year yield climbed as much as 11 basis points to 5.27%, a fresh 19-year high, while the 30-year rate jumped to 5.55%. Shorter-dated yields also rose as traders braced for the Fed to keep tightening policy to rein in inflation.
US oil rose in early Asian trading after Brent settled above $105 a barrel as optimism faded for an imminent diplomatic breakthrough in the Middle East.
Equity-index futures for Asia were mixed, with contracts pointing to losses in South Korea and Hong Kong and marginal gains in Japan and Australia. US stock futures edged lower in Asian trading after the S&P 500 erased its advance for the month and the Nasdaq 100 fell 1.1%. The dollar rose and gold dipped on Monday.
Elevated oil prices are adding to pressure on global bond markets by keeping inflation risks alive and complicating the outlook for interest rates. In the US, stronger business activity and concerns over government debt have added fuel to the biggest Treasury selloff since President Donald Trump’s April 2025 tariff rollout rattled markets.
“The broader market hasn’t been able to gain much traction because of rising yields and oil prices,” said Chris Larkin at E*Trade from Morgan Stanley. “And with the Fed focused on the inflation side of its mandate, unless this week’s labor-market data is a major surprise, it will likely play second fiddle to interest rates and energy.”
Iran and the US remained far apart on a ceasefire and reopening the Strait of Hormuz, with Tehran sticking to a proposal Trump has rejected. Trump denied an Axios report that he’s willing to offer sanctions relief and release frozen Iranian funds in exchange “for concrete nuclear concessions.”
Iranian officials have also privately expressed pessimism about reaching an agreement to end hostilities and reopen the strait before the US midterm elections in November, according to people familiar with the matter.
“Our expectations remain that the conflict will be with markets for the foreseeable future and the global economy will continue adjusting to the realities of the supply disruptions,” said Ian Lyngen at BMO Capital Markets.
Investors will also be watching a packed slate of US economic data this week for signs the economy remains strong enough to support further Fed tightening. Consumer confidence and August JOLTS figures are due Tuesday, followed by consumer-spending and inflation data and then payrolls on Friday.
“If economic resilience and investment demand remain intact, there may still be scope for yields to move higher,” said Seema Shah at Principal Asset Management.
In currencies, the yen will remain in focus after edging lower in New York following an earlier rally sparked by another warning from Japan’s currency czar over its weakness.
Atsushi Mimura, Japan’s top currency official, told Reuters on Monday that the country’s prime minister and finance minister, along with the US, had recently sent a “very clear” message about currency depreciation. The yen traded around 157.40 per dollar early Tuesday.
“Ongoing policymaker discomfort with yen depreciation will reinforce the market’s tendency to self-police around the 160 level,” said Pat Locke, a currency strategist at JPMorgan in New York.
Corporate Highlights:
Chipmaker Advanced Micro Devices Inc. agreed to acquire World Labs for $8.2 billion, gaining an artificial intelligence startup founded by industry pioneer and researcher Fei-Fei Li. The Pentagon awarded RTX Corp. a contract valued at $20.7 billion to nearly double production of air-to-air missiles, the latest agreement by the Trump administration as it looks to boost output of munitions strained by the war in Iran. SpaceX’s massive Starship rocket reached orbit for the first time on Monday morning, achieving a milestone for the program even though the company cut the mission short after an earlier engine failure. Certification of Boeing Co.’s long-delayed 737 Max 10 variant will be held up by the Federal Aviation Administration over a new software issue, just as the US planemaker was in the final stages of winning approval to begin deliveries to airlines.
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 7:06 a.m. Tokyo time Hang Seng futures were little changed S&P/ASX 200 futures were little changed Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro was little changed at $1.1373 The Japanese yen was unchanged at 157.39 per dollar The offshore yuan was little changed at 6.7118 per dollar Cryptocurrencies
Bitcoin fell 0.5% to $83,077.88 Ether fell 0.5% to $2,667.56 Commodities
West Texas Intermediate crude rose 0.9% to $93.40 a barrel Spot gold rose 0.1% to $4,121.13 an ounce This story was produced with the assistance of Bloomberg Automation.
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