Asian Shares Edge Higher as Slumping Treasury Yields Stabilize
By Stella Qiu
SYDNEY () – Asian shares showed modest gains on Friday following cautious buying of beleaguered Treasury notes, buoyed by the narrow passage of U.S. President Donald Trump’s tax legislation through the House of Representatives. Nonetheless, concerns about debt continued to persist.
Overnight, global PMI data revealed an acceleration of business activities in the U.S. during May, contributing to early gains on Wall Street. However, increased selling pressure later caused markets to close mostly unchanged. Conversely, subdued economic activity in Europe led to a decline in share prices there. [ .N ]
The Nasdaq futures and S&P 500 futures remained unchanged.
The House controlled by Republicans narrowly approved Trump’s tax reduction legislation, aiming to fulfill numerous promises made during his campaign. However, this move is expected to elevate the current U.S. debt of $36.2 trillion by an additional $3.8 trillion within the coming ten years.
Yields on Treasury bonds, particularly those with longer maturities, have risen due to concerns over the state of U.S. finances ahead of the bill’s approval. This situation worsened following Moody’s decision to lower the U.S. credit rating last week, pointing to increasing levels of debt as a key factor.
Nevertheless, the 30-year bonds were able to attract some purchasers during the night, as their pricing has become quite appealing. On Friday, these bond yields decreased an additional one basis point to reach 5.037%, after declining four basis points earlier in the day, moving them further down from a peak of 5.161% which was the highest level in 19 months.
“It might just be the assurance of receiving something solid that has helped reduce some of the fear and panic in the markets. Additionally, significant shifts often come with an element of overreaction,” explained Ken Crompton, who serves as the senior interest rate strategist at the National Australia Bank.
The current market shift and the approval of this iteration of the bill do not indicate any substantial decrease in U.S. bond issuance or address the larger issue of increased global bond supply.
In Asia, yields on ultra-long Japanese government bonds (JGBs) remained close to record levels on Friday. The yield for 30-year JGBs surged by 23 basis points this week and was last reported at 3.175%, a figure that the Bank of Japan is carefully watching.
The MSCI’s comprehensive gauge of Asia-Pacific shares excluding Japan edged higher by 0.1% on Friday; however, over the course of the week, it remains poised to show a decline of 0.4%, breaking a streak of five consecutive weeks of increases.
Chinese blue-chip stocks and Hong Kong’s Hang Seng index remained relatively stable.
Japan’s Nikkei gained 1%, following data indicating that the country’s core inflation increased at its quickest yearly rate in over two years during April.
In the foreign exchange market, the dollar remained weak once more and is poised for a weekly decline of about 1.2% relative to key currencies. The euro is looking at its first weekly gain following four consecutive weeks of losses, trading 0.2% higher at $1.1302 on Friday. [FRX/]
U.S. Federal Reserve Governor Christopher Waller said on Thursday he still sees a path to rate cuts later this year, but noted that the outlook depends on where Trump’s tariff policy settles.
Bitcoin is poised to show a weekly increase of 7%, trading around $111,524, after reaching an all-time peak of $111,965 earlier this week on Thursday.
Oil prices declined for the fourth consecutive session amid expectations of increased production from OPEC+ nations. American crude futures decreased by 0.7%, settling at $60.76 per barrel, with a weekly drop of 2.7%.
Brent dropped 0.6% to $64.03 per barrel.
In the realm of precious metals, gold prices remained steady at $3,292 per ounce, though they were poised to show a weekly increase of 2.8%.
(Reported by Stella Qiu; Edited by Stephen Coates)