SINGAPORE — Longer-dated US Treasury yields hit their highest in 18 months on Thursday, while Asian stocks and the dollar slipped as worries of a worsening fiscal outlook in the world’s biggest economy weighed on investor sentiment.
The spotlight remains on US President Donald Trump’s tax bill that is expected to be voted on this week in Congress and investors are worried it could add about $3.8 trillion to the $36 trillion US debt pile.
The dour mood among investors after Moody’s downgraded the US credit rating last week has left markets slightly listless as a “Sell America” narrative gains traction, with the greenback hovering near its lowest in two weeks against other major currencies.
Investors have also been looking for options outside the US based on expectations it would not be immune in the event of a global recession spurred by Trump’s erratic trade policy.
“We continue to have uncertainty and worries about growth and worries about the ability of the US government to raise more debt,” said Vis Nayar, chief investment officer at Eastspring Investments in Singapore.
“We’re not expecting some sort of mean reversion back toward dollar strength, but longer term that all leads to diversification into these emerging market countries.”
Investor reluctance about buying US assets was evident on Wednesday after the US Treasury Department saw tepid demand for the $16 billion sale of 20-year bonds that pushed bond yields higher.
Yield on 30-year Treasury bonds stayed above 5 percent after hitting a 1-1/2 year high earlier in Asian hours.
That weighed on stocks in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan 0.5 percent lower, though still near the seven-month high it touched in the previous session.
Japan’s Nikkei was down 0.7 percent on the stronger yen. China’s benchmark index slipped 0.2 percent, while Hong Kong’s Hang Seng index declined 0.8 percent in early trading.
