Global Market Update: Asian Stocks Under Pressure As Bond Yields Surge On Rate Hike Fears

Asian markets came under pressure on Friday as a selloff in global bonds pushed long-term US Treasury yields to their highest levels in years and raised concerns about further interest-rate hikes by the Federal Reserve.

Bond yields also moved higher across the Asia-Pacific region. Ten-year yields in Australia and New Zealand rose by three basis points each, while the yield on a global bond index reached 4% for the first time since 2007. Japanese government bonds also weakened.

The moves followed a sharp decline in US Treasuries during the previous session. The 30-year Treasury yield climbed to its highest level since 2004, while the 10-year yield rose eight basis points to 5.20%.

Oil Prices Add To Inflation Concerns

Higher oil prices have added to worries about inflation and interest rates. Brent crude gained for a second consecutive session to close at $106.60 a barrel, taking its rise this year to more than 75%.

Oil prices eased around 0.5% on Friday as the US and Iran explored a possible phased agreement. Under the proposed arrangement, Tehran could reopen the Strait of Hormuz while Washington could lift its blockade of Iranian ports.

However, crude remains well above levels seen earlier in the year. Higher energy costs can feed into inflation and make it harder for central banks to ease monetary policy.

Markets Price In More Fed Rate Hikes

Interest-rate expectations have become a major driver for bond and equity markets.

Swaps are now pricing in three additional quarter-point Fed rate increases over the next year. Expectations of tighter monetary policy have pushed long-term Treasury yields higher and added pressure on equity valuations.

The rise in bond yields has also changed the relative appeal of stocks and other risk assets, as investors reassess borrowing costs and future corporate earnings.

Yen Nears 160 Per Dollar

Japan's currency remained under close watch as the yen continued its recent decline.

The yen traded around 158.70 per dollar early on Friday after falling for roughly two weeks. That has brought it closer to the 160-per-dollar level, which is being watched for signs of possible intervention by Japanese authorities.

Strategists see 160 as an important level for Japan as the yen continues to weaken following the Bank of Japan's September 18 policy meeting.

Bond Selloff Deepens Since US-Iran Conflict

The latest rise in Treasury yields extends a sharp repricing in the bond market since the start of the US-Iran war.

Two-year Treasury yields have risen by more than 150 basis points during that period, while 30-year yields have climbed more than 80 basis points.

Wednesday's bond selloff was among the largest one-day declines since US President Donald Trump's tariff announcement in April 2025.

With oil prices still elevated and market pricing in more US rate increases, bond yields are likely to remain an important factor for Asian equities and other global markets.

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