Bonds suffered losses due to rate hikes; yen in focus

SYDNEY: Asian stocks posted a fourth consecutive weekly decline on Friday and bonds took major losses as investors scrambled to hold on to the US Federal Reserve’s interest rate outlook while currency markets ended a wild week on edge. .

Fed members’ projections for aggressive growth and consistently higher rates for the next year or so have sparked another round of dollar buying that is driving other assets.

World stocks hit a two-year low on Thursday and are down 3 per cent this week. The euro and yen fell to 20-year lows and on Thursday, Japanese officials stepped into the market to buy the yen for the first time since 1998 and halt its decline.

The resulting spike has the yen up to 142.20 per dollar and is on course for its best week in more than a month and, for now, has put the brakes on the broader dollar’s gains.

Among regional markets, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent to a two-year low. It has fallen by 3 per cent this week. Japan’s Nikkei was closed for a public holiday on the occasion of the autumn equinox.

Overnight, Wall Street indexes fell and the long-term US Treasury was dumped — raising the 10-year yield by nearly 20 basis points to 3.71 percent — as traders kept US interest rates above 4 percent for some time. Tried to adjust the probability. ,

“The 10-year was holding up to the new calibrated cash rate,” Westpac’s head of rates strategy Damian McCullough said in Sydney.

“If you think the front-end is going to peak at 4.60 per cent, can you really sustain the 10-year bond yield at 3.70 per cent?” They said.

“It’s very attractive price action… I think this volatility is going to spread across all markets in the near term (until) the rate market stabilizes.”

S&P 500 futures rose 0.1 per cent and European futures 0.4 per cent at the start of the Asia session.


Hikers this week saw interest rates rising almost everywhere in the world, with Britain, Sweden, Switzerland and Norway seeing huge sell-offs in European bond markets, especially of gilt.

But the Fed’s approach has seen that both safety flows and higher yields in the money market help the greenback, while the energy crisis and the war on the door weigh the euro.

Preliminary manufacturing surveys in Europe and the UK’s new finance minister announcing his “growth plan” brightened the day ahead.

The euro was last at $0.9844, a fraction from Thursday’s 20-year trough at $0.9807 – although all eyes are on the yen.

Japan hasn’t disclosed the size or details of its yen purchases, but the dollar/yen took two big feet down during Asia and London trading late on Thursday and the risk of the other may have scared speculators off for a while. enough for.

“It changes market dynamics in terms of risk-reward for short-term players,” said UBS strategist James Malcolm.

The Australian and New Zealand dollars are hovering near their lowest levels since mid-2020, with the Australian dollar at $0.6638 and the kiwi at $0.5852.

Sterling was pegged at $1.1226, the lowest in nearly four decades.

China’s yuan settled at 7.0964 per dollar in offshore trade on Friday, the lowest in more than two years and within striking distance of a record low.

Oil is expected to suffer weekly losses in commodity markets as a hike in rates raised demand concerns. Brent crude futures were trading at $90.58 in Asia on Friday.

Gold, which provides no earnings, has suffered as US yields rose and was last flat at $1,671 an ounce.

Bitcoin has also been battered and held at $19,322 amid the flight from the riskier asset.

(Editing by Sam Holmes)

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