Global Bond Yields Hit New Highs As Oil Tops US$90

Selling drove global bond yields to major new highs on Tuesday as renewed fighting in the Middle East lifted oil prices above US$90 a barrel and pressured stock markets worldwide, according to RTHK. In Hong Kong, the benchmark Hang Seng Index opened down 151 points, or 0.59 percent, at 25,415. The China enterprises index fell 53 points, or 0.63 percent, to 8,459, while the tech index lost 28 points, or 0.62 percent, to open at 4,591. The Shanghai Composite Index edged down six points, or 0.16 percent, to open at 3,979, while the Shenzhen Component Index inched up two points, or 0.02 percent, to 14,017 and the ChiNext Index dipped three points, or 0.1 percent, to 3,435. In Tokyo, the Nikkei trimmed its losses to 121 points at one stage before lunch after opening down 426 points, or 0.64 percent, at 65,885. In Seoul, the Kospi opened 35 points, or 0.52 percent, lower at 6,784 before regaining some ground to be 13 points down at one stage before noon. The 10-year US Treasury yield rose 2.2 basis points to a near 20-month top of 4.78 percent. Japan's 10-year benchmark was closing in on 3 percent, a level not seen for a generation. Higher oil prices and rising US-Iran tension are stoking worries about inflation, which is negative for bonds, as Federal Reserve chairman Kevin Warsh has reset expectations for the outlook. In a speech late last week, he signalled policymakers could move if price pressures fail to show signs of easing. Wee Khoon Chong, APAC Macro Strategist at BNY, said the macro mix is turning more challenging for duration and risk assets as hawkish monetary policy, renewed geopolitical and inflation risks, and rising fiscal concerns converge to keep upward pressure on global term premiums and long-end yields.