TOKYO- Global shares held firm near record highs on Monday while US bond yields flirted with three-month lows as investors expect the Federal Reserve to stick to its dovish mantra later this week.
Japan’s Nikkei rose 0.35 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent. Activity was limited with the region’s largest markets – China, Hong Kong and Australia – closed for a holiday.
Globally, equity markets were basking in the prospects of a broadening economic recovery from the coronavirus pandemic and anticipation of continuity in dovish monetary policy from the US Federal Reserve.
The MSCI all-country world equity index, the US S&P 500 and the pan-regional STOXX Europe 600 index all closed at record highs on Friday.
The rally came even as US inflation data on Thursday exceeded market expectations.
“One big factor is that the Fed has been saying inflation will be transitory and that it will maintain loose monetary policy,” said NorihiroFujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “But another factor to consider is that markets are simply awash with cash.”
Ample funds are finding their way to bonds, where the yield on 10-year US Treasuries stood at 1.465 percent ahead of the Fed’s policy meeting this week, having fallen to a three-month low of 1.428 percent on Friday.
“It is becoming painful for bond bears and I bet the 10-year yield will fall to 1.25 percent or even 1 percent,” said Akira Takei, fund manager at Asset Management One, noting that US economic recovery is likely to slow in coming months.
