A global bond selloff, which had pushed yields to multi-decade highs, began to stabilize in Asia as oil prices reversed a two-day surge. The 10-year Treasury yield decreased one basis point to 5.19%, following a jump of over 20 basis points in the preceding two sessions. Similarly, the rate-sensitive two-year yield declined two basis points to 4.91%. Gold remained around $4,270 an ounce, and the dollar steadied after five consecutive gains.
The easing of pressure was partly attributed to a drop in Brent crude oil prices by 0.9% to approximately $105.60 a barrel, after a surge of more than 7% in the previous two sessions. This decline in oil prices was influenced by ongoing US and Iranian negotiations exploring a phased deal that could lead to Tehran reopening the Strait of Hormuz and Washington lifting its blockade on Iranian ports. This development contributed to a stabilization of market sentiment, leading to a rise in stocks and a paring of losses in US equity-index futures. MSCI’s Asia Pacific equities gauge increased by 0.3%, with Japan showing leading gains.
Despite the temporary stabilization, market analysts warn that oil prices and bond yields will likely remain key drivers. Elevated energy costs are expected to continue fueling inflation, reinforcing expectations for further tightening by the Federal Reserve. Swap markets fully price in three additional quarter-point interest rate hikes over the next year. This outlook has already driven long-term Treasury yields to multi-decade highs and increased pressure on equity valuations. Rajeev De Mello, a global macro portfolio manager at Gama Asset Management, noted that after such a rapid rise, the bond market is probably due for a period of consolidation. Timothy Moe, chief APAC regional equity strategist at Goldman Sachs Group Inc., anticipates a bumpy near term leading up to the US midterm elections, driven by politics, rates, higher energy prices, and geopolitical risks, but foresees a rally propelled by earnings and attractive valuations towards the end of the year.
The broader context reveals that the 30-year Treasury yield had previously reached its highest level since 2004, and the 10-year yield had risen eight basis points to 5.20% in the New York session. Over a recent period, two-year Treasury yields have climbed more than 150 basis points, and 30-year yields are up more than 80 basis points. The bond selloff experienced earlier in the week was one of the largest single-day drops since President Donald Trump's April 2025 tariff rollout. The yield on Japan's 10-year bond advanced 2.5 basis points to 3.100%, and Australia's 10-year yield advanced two basis points to 5.39%.
