TOKYO- US Treasury yields pushed to a near four-week peak on Wednesday, lifting their Asia-Pacific counterparts and the dollar while pressuring equities, as data sowed new doubts about the timing and extent of Federal Reserve rate cuts.
Crude oil rose for a fourth day to reach a four-week high amid speculation OPEC+ will maintain production cuts at a meeting this Sunday.
Benchmark US 10-year yields ticked up as high as 4.568 percent in Tokyo trading hours, a level not seen since May 3, following poorly received two- and five-year Treasury auctions overnight.
Equivalent Japanese yields hit the highest since December 2011 at 1.07 percent , while Australian yields jumped to a more than three-week top of 4.428 percent .
Investors were also caught off-guard by a sharp improvement in a US consumer confidence measure for May. Economists had predicted a fourth straight month of weaker confidence, particularly after a tepid reading for the University of Michigan’s analogous survey result from Friday.
That has kept the market guessing about the strength of the economy and sticky inflationary pressures, which in turn cloud the outlook for the Fed’s policy path.
Traders currently put the odds of at least a quarter-point interest rate cut by September at 44 percent following the data, from a coin toss a day earlier, according to the CME Group’s FedWatch Tool.
The dollar rose to a four-week peak of 157.41 yen on Wednesday, while gaining about 0.1 percent against both the euro and sterling
Australia’s dollar slipped slightly to $0.6646, giving up gains from earlier in the day following an unexpected jump in local consumer inflation last month.
“Whether incoming US economic news sees the money market pendulum swing back in favor of lower US rates in Q3” will be key to whether the Aussie can top this month’s four-month peak of $0.6714, National Australia Bank strategists wrote in a client note.
“Our base line view is ‘yes it will’ – we still have September for a first Fed easing, then another by year-end.”
