By Tom Westbrook
SINGAPORE, Sept 29 (Reuters) – Oil prices and bond yields rose in an uncomfortable combination for stocks on Tuesday, as investors braced for an era where short-term borrowing costs settle at their highest levels in years.
Australia raised its cash rate to a 15-year high, as expected, and market participants have bet on it going higher still.
“We’re coming to a new environment,” said Angus Hui, head of fixed income at Fullerton Fund Management in Singapore, as inflation and a strong economy keep rates elevated.
“We think bond yields are unlikely to go back to the very good old days when bond yields were very, very low.”
The benchmark 10-year US Treasury yield spiked to a 19-year high above 5.27% on Monday for a rise of nearly 50 basis points through September. Yields rise when bond prices fall and the monthly selloff is the heaviest for two years.
The US 2-year yield has moved even further, shooting up more than 57 bps this month to the threshold of 5%, as traders figure that US growth and inflation will drive three more Federal Reserve rate hikes by the middle of next year.
Sovereign yields are an anchor for global markets, a reference price for investing in riskier stocks and a benchmark for mortgages and corporate borrowing. Higher rates mean pressure on government, corporate and household budgets.
Yields drifted higher in Asia, though moves were modest; US equity futures fell 0.2% along with most regional markets.
Only a massive $150 billion boost to a buyback plan by chipmaker Nvidia, which lifted the stock price, held the rates-sensitive Nasdaq to a fall of 0.9% on Monday.
No sign of a breakthrough in the Middle East left Brent crude futures at $107 a barrel and climbing. [O/R]
Fragile sentiment in China’s technology sector, where stocks were hit on Monday by US plans to ban Chinese components from data centres, left the blue-chip CSI300 index pinned to a one-year low. [.SS]
The prospectus for US AI giant Anthropic illustrates the scale of the gamble on AI, with the company targeting a $2 trillion valuation, but planning to spend $518 billion on computing and infrastructure to build its transformative vision.
Foreign exchange markets were broadly steady through the Asia morning on Tuesday, leaving the dollar headed for a monthly gain. [FRX/]
The yen rose on Monday when Japan’s top currency diplomat told Reuters that traders ought to heed the signal from Tokyo and Washington’s united concern last week at yen weakness.
It hovered at 157.50 per dollar, while the euro held at $1.1360. The Australian dollar was steady at $0.7017 and hardly budged as the Reserve Bank of Australia made its well-telegraphed hike.
“Some of the upside risks to inflation are materialising,” the RBA board said, pointing to an energy supply disruption, growth and inflation running higher than expected.
(Reporting by Tom Westbrook; Editing by Stephen Coates and Thomas Derpinghaus)
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