Japanese Bonds Rebound, S&P 500 Futures Edge Up: Markets Wrap

(Bloomberg) — Japanese bonds rebounded after a selloff that rippled through global debt markets, while US equity-index futures edged higher as volatility showed tentative signs of easing.

Yields on 40-year Japanese debt fell 6.5 basis points after Finance Minister Satsuki Katayama called for calm after a rout that had pushed super-long yields to all-time highs. In a further sign that markets were finding some footing, Treasuries recovered part of their losses and US equity-index futures rose 0.2% after the S&P 500 had posted its steepest loss since October.

Asian shares fell 0.6%, even as memory and storage makers such as Samsung Electronics Co. gained. Japanese shares were also well off their session lows. Haven demand continued, with gold rising to yet another record high and silver trading near an all-time peak.

President Donald Trump’s threat to impose tariffs on European nations that rejected his proposal to purchase Greenland has unsettled markets, prompting investors to reassess risk after an AI-fueled rally took global stocks to all-time highs. The selloff in Japanese bonds compounded the pressure, adding to strains driven by uncertainty over US policy and trade.

“Tariff War 2.0, or Territory War 1.0 if you prefer, is in full swing and has potential to cause significant near-term market disruptions,” said Victoria Greene at G Squared Private Wealth. “A lot depends on how the next few weeks play out. So, we are not ‘panic selling,’ but watching carefully and ready for volatility.”

Key for markets on Wednesday will be how Trump’s trip to the World Economic Forum in Davos pans out after the president ratcheted up tensions with Europe by threatening to impose tariffs on eight countries that have opposed his demand that Denmark hand over Greenland.

While traders have been able to get past a whirlwind of other unexpected developments this year — including the White House’s capture of Venezuela’s leader and its renewed attacks on the Federal Reserve — the size of Tuesday’s moves suggests that investors’ willingness to shrug off earlier shocks is beginning to erode.

Those tensions showed up on Wall Street, which returned after a holiday. The global market selloff on Tuesday was first triggered by domestic issues in Japan, where yields on 30-year debt surged over a quarter percentage point on concerns about Prime Minister Sanae Takaichi’s plans to cut taxes and boost spending.

The jump threatened to unravel so-called carry trades — which involve buying global assets with low-interest loans in Japan — and helped push up bond yields elsewhere.

Long-term US yields had hit a four-month high in the US session, with the 30-year gaining eight basis points as investors reacted to the rout in Japanese bonds.

Then there was also news that a Danish pension fund was planning to exit Treasuries.

“Despite elevated macro noise — from renewed trade-war rhetoric to rising global yields — flow has consistently pointed to monetization of hedges and volatility selling, not panic buying,” wrote Chris Murphy, derivatives strategist at Susquehanna International Group LLP.

However, the rebound in Japanese sovereign debt early Wednesday has begun to ease some concerns.

Asking market participants to calm down, Katayama pointed to Japan’s lowest reliance on debt issuance in 30 years, rising tax revenue and the smallest fiscal deficit among Group of Seven economies as evidence to support the government’s view that its fiscal policy is responsible and sustainable.

“Japanese government bonds are settling and are bid across the board with yields ticking lower,” said Andrew Jackson, the head of Japan equity strategy at Ortus Advisors Pte in Singapore. “While they remain highly elevated after yesterday’s surge, with banks and insurance names also coming down, it feels like the worst is behind us as far as the JGB meltdown.”

Corporate News:

Netflix Inc.’s shares fell after warning of higher program spending and the cost of closing its deal with Warner Bros. United Airlines Holdings Inc. beat Wall Street estimates for the fourth quarter and anticipates a strong 2026, driven by demand from high-spending domestic passengers and international travelers. Kraft Heinz fell 4.2% in after-hours after the food company registered up to 325 million shares for potential sale by holder Berkshire Hathaway. Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.3% as of 12:04 p.m. Tokyo time Japan’s Topix fell 0.9% Australia’s S&P/ASX 200 fell 0.4% Hong Kong’s Hang Seng fell 0.1% The Shanghai Composite rose 0.4% Euro Stoxx 50 futures fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1727 The Japanese yen rose 0.1% to 157.96 per dollar The offshore yuan was little changed at 6.9602 per dollar Cryptocurrencies

Bitcoin fell 0.3% to $89,085.92 Ether fell 0.9% to $2,964.36 Bonds

The yield on 10-year Treasuries declined one basis point to 4.28% Japan’s 10-year yield declined three basis points to 2.340% Australia’s 10-year yield was little changed at 4.77% Commodities

West Texas Intermediate crude fell 0.8% to $59.85 a barrel Spot gold rose 1.7% to $4,844 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Joanna Ossinger, Abhishek Vishnoi, Winnie Hsu and Joanne Wong.

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