Treasury Yields Climb as Stocks Slide Over U.S. Fiscal Concerns
By Johann M Cherian
SINGAPORE () – On Thursday, longer-term U.S. Treasury yields reached an 18-month peak, whereas Asian stocks and the dollar experienced declines. Investor confidence was dampened due to concerns over a deteriorating fiscal situation in the largest global economy.
The focus continues to be on U.S. President Donald Trump’s proposed tax legislation, which is anticipated to come up for a vote in Congress this week. Investors are concerned as it might contribute an additional $3.8 trillion to the current $36 trillion U.S. national debt.
The somber sentiment amongst investors following Moody’s downgrade of the U.S. credit rating last week has resulted in lethargic market conditions as a “Sell America” storyline starts to take hold. This shift has caused the dollar to linger close to its lowest point in two weeks relative to other significant global currencies. [FRX/]
Investors are also exploring opportunities beyond the U.S., anticipating that they may not remain insulated should a worldwide economic downturn occur as a result of President Trump’s unpredictable trade policies.
“There remains ambiguity and concerns regarding economic expansion and doubts about the U.S. government’s capacity to accumulate additional debt,” stated Vis Nayar, who serves as the chief investment officer at Eastspring Investments in Singapore.
We aren’t anticipating a shift back towards dollar strength, but over the long term, this will result in more diversity within these emerging market nations.
Investors showed hesitance towards purchasing U.S. assets on Wednesday following a weak response to the $16 billion offering of 20-year bonds from the U.S. Treasury Department, which led to increased bond yields.
The yield on 30-year Treasury bonds remained over 5% following an intra-day peak during the Asian trading session, which was the highest level in one and a half years. [US/]
This impacted Asian stocks, causing MSCI’s regional benchmark index excluding Japanese shares to drop by 0.5%, even though it remained close to the seven-month peak reached during the prior session.
Japan’s Nikkei dropped by 0.7% due to the appreciation of the yen. In early trading, China’s main index fell by 0.2%, and Hong Kong’s Hang Seng index decreased by 0.8%.
Nevertheless, experts have noted that market sentiment has recently improved due to economic indicators showing strength despite the uncertainties from trade issues caused by Trump’s tariff actions.
This can be verified using business activity surveys from Japan, the Eurozone, and the U.S., which are set to release later today.
The limited advancement in trade agreements so far has continued to make investors nervous.
The spotlight will also be on a Group of Seven gathering in Canada, where finance ministers aim to present a hopeful outlook during talks in hopes of securing an accord on a collective statement primarily addressing non-tariff matters.
Investors have likewise been searching for indications that currency markets might become part of trade discussions. However, both the U.S. and Japan concurred on Wednesday that the current dollar-yen exchange rate aligns with economic basics.
In the meantime, Bitcoin climbed for the fifth consecutive session, reaching an all-time peak of $110,636.58 as the globe’s most valued cryptocurrency bounces back from the sell-off triggered by last month’s tariffs. Its value increased by approximately 1.5% at that point.
Oil prices retreated on Thursday, following a significant increase from the day before, as unexpected rises in U.S. crude and fuel stockpiles sparked worries about reduced demand. [O/R]
Gold prices rose for the fourth consecutive session, aided by a weaker dollar and safe-haven buying. [GOL/]
(Reported by Johann M Cherian; Edited by Jamie Freed)