Asia-Pacific markets experienced a downturn on Wednesday as investors grappled with rising bond yields and heightened geopolitical uncertainties. The situation intensified after U.S. President Donald Trump indicated he was on the verge of ordering an attack on Iran, stating he was “an hour away” from making a decision before ultimately opting to delay military action for a few days.
In a reflection of this turbulent atmosphere, yields on U.S. Treasurys surged, briefly reaching 5.197%, the highest level seen since July 2007. This spike was fueled by concerns surrounding resurging inflation, prompting investors to offload bonds. The yield on the longer-dated 30-year Treasury bond subsequently traded slightly lower at 5.173%.
In Japan, super-long government bond yields also saw some relief, with the 30-year JGB yield dipping over 9 basis points to 4.068%, following record highs earlier in the week. However, shorter-dated Japanese debt remains under pressure; the 5-year JGB yield climbed to an unprecedented 2.041%.
Masahiko Loo from State Street commented on the landscape, suggesting that the record-high Japanese government bond yields are contributing to a broader global “duration reset.” He emphasized that while this trend may tighten global financial conditions, it is expected to occur gradually without causing systemic stress. Although higher yields could impact duration-sensitive assets and elevate global borrowing costs, Loo indicated that the repricing is part of a larger adjustment within bond markets, not merely a localized funding shock related to Japan’s situation. He also noted that Japan’s debt market is primarily domestically financed and supported by substantial household savings.
On the stock market front, Japan’s Nikkei 225 dropped 1.23% to 59,804.41, while the Topix fell by 1.53% to 3,791.65. South Korea’s Kospi declined 0.86% to 7,208.95, and the smaller Kosdaq index plummeted by 2.61% to 1,056.07. Shares of Samsung Electronics increased slightly by 0.18%, even amidst a breakdown in wage negotiations with workers, leading to planned strikes involving over 47,000 employees.
In Australia, the S&P/ASX 200 lost 1.26% to finish at 8,496.6. Hong Kong’s Hang Seng index experienced a slip of 0.57%, while the mainland’s CSI 300 ended the day flat.
U.S. stock futures showed a modest bounce, with S&P 500 futures rising by 0.14% and Nasdaq 100 futures gaining 0.25%. Futures linked to the Dow Jones Industrial Average increased by 55 points, or 0.11%.
The previous night on Wall Street concluded with lower stock prices, marking the third consecutive session of losses for the S&P 500, which closed down 0.67% at 7,353.61. The Nasdaq Composite finished 0.84% lower at 25,870.71, and the Dow Jones Industrial Average declined by 322.24 points, or 0.65%, finishing at 49,363.88.
