Bond yields rise amid higher energy prices
Government bond yields worldwide rose sharply on September 1 as the resumption of hostilities in the Middle East pushed oil prices above $90 per barrel and heightened inflation concerns. Stock markets were also under pressure, Channel NewsAsia reports, citing Reuters.
Yields reached new highs
The yield on Japan's 10-year government bonds reached 3% for the first time in a generation. The yield on 10-year US Treasury bonds, a benchmark for pricing various asset classes, rose to 4.78% — its highest level since the start of 2025. Futures for French and German government securities continued their decline, which had previously pushed their yields to 15-year highs.
Ryutaro Kimura, a senior strategist at BNP Asset Management in Tokyo, said that amid rising borrowing costs in Japan, there is a certain resignation to the situation, tinged with helplessness. According to him, Japanese borrowing costs had for many years been a reliable support for global markets.
Energy prices and rate expectations
Brent oil futures exceeded $91 per barrel in Asian trading. Europe's benchmark gas price closed on Monday at its highest level in more than three and a half years. Higher energy prices and tensions in relations between the United States and Iran are increasing inflation risks, which is weighing on bonds.
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BNY's macro strategist for the Asia-Pacific region noted that tight monetary policy, geopolitical and inflation risks, as well as fiscal concerns, are sustaining pressure on long-term yields. Markets were pricing in a rate hike in New Zealand on September 2 and in Europe next week, while the probability of hikes in the United States and Japan within a month was assessed at more than 50%.
Stock market reaction
Japan's Nikkei index was almost unchanged by the start of the second half of the day, while Hong Kong's Hang Seng fell 1%. Shein Global shares in Hong Kong dropped 8% below their offering price, which had already been reduced compared with previous fundraising rounds.
US President Donald Trump threatened new strikes against Iran after the first exchange of fire in a month. At the same time, the intensification of hostilities by Russia — the aggressor state — against Ukraine brought wheat prices close to highs of nearly three years.
