SINGAPORE- Asian stocks sank to 11-month lows on Wednesday as an ongoing rout in global bond markets saw US yields reach 16-year highs, challenging equity valuations and souring appetite for risk assets in general.
The spike in Treasury yields lifted the dollar to new heights with only the yen showing some fight amid speculation the Japanese authorities might be intervening behind the scenes.
The yen breached the 150-per-dollar level in the London afternoon on Tuesday before suddenly shooting to 147.3.
There was no confirmation from Tokyo, where Japan’s finance minister and top currency diplomat have made no direct comment on the move. The yen last stood at 149.18 per dollar.
Stronger-than-expected US job openings data, meanwhile, sent the 10-year yield up nearly a dozen basis points (bps) on Tuesday and it rose a further four bps in Asia to briefly top 4.85 percent for the first time since 2007.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped by more than 1 percent for a second day running. Japan’s Nikkei fell 1.8 percent .
S&P 500 futures fell 0.3 percent and European futures fell 0.2 percent .
“With the risk-free rate so high, it’s not really compelling for people to allocate away from short-term cash-like investments,” said Mel Siew, a portfolio manager at Muzinich & Co in Singapore. The S&P 500 fell 1.4 percent on Tuesday.
Since the move has not come with much of a shift in market gauges of inflation expectations, US yields in real terms – subtracting inflation – are also at almost 15-year highs and are sucking money from all corners into dollars.
Across Asia’s emerging markets bonds are under pressure and the Thai baht Taiwan dollar Malaysian ringgit Indonesian rupiah and Indian rupee are all at or near milestone lows, with some central banks stepping in to stem the tide.
