Asian Bonds Under Pressure as Oil Extends Advance: Markets Wrap
(Bloomberg) — Asian bonds followed Treasuries lower as renewed geopolitical tensions drove oil prices higher, fueling inflation concerns and expectations for further monetary tightening.
Government bonds in Japan, Australia and New Zealand fell after the benchmark 10-year Treasury yield rose two basis points to 4.77%, its highest level since January 2025. The yield on the 10-year Japanese government bond rose to 2.965% after touching a three-decade high in the previous session.
Brent crude extended gains in early Asian trading to over $91 a barrel after renewed fighting in the Middle East. The US and Iran exchanged strikes for the first time in about a month as American forces hit an island in the Strait of Hormuz and the Islamic Republic responded by launching attacks on the United Arab Emirates and Jordan.
Elsewhere, the MSCI Asia Pacific equities gauge was little changed, with focus on the technology sector after Nvidia Corp. said it’s investing $3.5 billion in MediaTek Inc., deepening its collaboration with the Taiwanese chipmaker.
The flare-up in Middle East tensions has dimmed prospects for a normalization of shipping through Hormuz, keeping oil prices elevated and adding to inflation concerns. Money markets have increased bets on a September interest-rate hike after Federal Reserve Chair Kevin Warsh underscored his commitment to bring down inflation at Jackson Hole last week, putting increased focus on this week’s employment report.
“With traders tracking geopolitical volatility as well as potential seasonal volatility, it will be interesting to see which market impulse from last week might carry over to this week,” said Chris Larkin at E*Trade from Morgan Stanley. “Unexpectedly strong labor-market data might be taken as bad news by the market, since it could reinforce expectations for a rate hike.”
The August US payrolls data is expected to be consistent with general steadiness in the labor market that’s helping the Fed focus more intently on its battle with inflation.
Friday’s jobs report “will be critical,” though the Sept. 11 consumer-price data will be even more important given Warsh’s view that the US economy is at full employment, said JPMorgan Chase & Co.’s Andrew Tyler. He’s shifted to a “tactically cautious” view on US stocks for the next few weeks, but expects a strong backdrop will persist amid economic data and earnings.
What Bloomberg Strategists say…
“Given the stimulative effects of higher rates and yields, we have to see a decent amount of financial distress from borrowers rolling over debts or taking on new loans to make rate increases restrictive. Until we actually get that distress and the subsequent cooling, the outlook is decidedly worse for bond investors than equity investors.”
— Edward Harrison, Macro Strategist, Markets Live. For the full analysis, click here.
In other corners of the market, gold recouped some of its losses from the past two days, trading around $4,460 an ounce. Rising rates are a headwind for the non-yielding metal, which still gained about 9.7% in August. A Bloomberg gauge of the dollar fell for a second consecutive day Tuesday.
In Asia, traders will be closely monitoring the yen as the Japanese currency traded near 160 versus the dollar, raising the risk that authorities may enter the market again to slow its decline.
While the currency strengthened slightly on Tuesday, the yen has still unwound more than half the gains it made during a record bout of intervention that began in late July.
Separately, US Treasury Secretary Scott Bessent told Japanese Finance Minister Satsuki Katayama and Bank of Japan Governor Kazuo Ueda that further interest-rate hikes were needed, NHK reported, citing an interview with a US official. Japan’s 10-year benchmark yield closed Monday just six basis points shy of 3%, a level not seen since 1996.
Corporate News:
Shein Global Holdings Ltd. is set to begin trading in Hong Kong after raising HK$13.6 billion ($1.7 billion) in an initial public offering. Anthropic has signed a cloud-computing deal worth $35 billion with Nvidia-backed cloud provider Lambda, with Nvidia itself holding the lease on the data center, according to people familiar with the deal. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 9:28 a.m. Tokyo time Hang Seng futures fell 0.4% Japan’s Topix rose 0.2% Australia’s S&P/ASX 200 fell 0.3% Euro Stoxx 50 futures fell 1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1624 The Japanese yen was little changed at 159.67 per dollar The offshore yuan was little changed at 6.7172 per dollar The Australian dollar rose 0.2% to $0.7180 Cryptocurrencies
Bitcoin was little changed at $78,872.6 Ether rose 0.1% to $2,475.73 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.77% Japan’s 10-year yield advanced 2.5 basis points to 2.965% Australia’s 10-year yield advanced seven basis points to 5.16% Commodities
West Texas Intermediate crude rose 1% to $86.61 a barrel Spot gold rose 0.5% to $4,460.58 an ounce This story was produced with the assistance of Bloomberg Automation.
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