US 2-year bond yield dam burst

US 2-year bond yield dam burst

People pass an electronic screen displaying Japan’s Nikkei stock price index inside a conference hall in Tokyo, Japan, June 14, 2022. REUTERS/Issei Kato

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Aug 30 (Reuters) – A look at the day ahead in Asian markets from Jamie McGovern

Another dam has exploded, with the two-year US Treasury yield soaring to a 15-year high of 3.50%, plunging global markets with more uncertainty and fear.

Wall Street managed to recoup some of its earlier losses on Monday but is still closed in the red, a development worth noting given the volume of selling on Friday. The failure to recover at all is a reflection of how anxious investors are at the moment.

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Not only do they have to adjust to a hawkish Fed, it also appears that the European Central Bank is ready to accelerate the pace of rate hikes. Bonds are being sold globally, the dollar is rising, and no corner of the investing world is safe from the fallout.

The scale of the rise in the US 2-year bond yield is really impressive – a year ago it was as low as 16 basis points, today it is up by 350 basis points. With the Fed likely to continue tightening, few could bet it will rise further.

Schedule

China’s troubles aren’t helping either. The yuan fell to a two-year low against the dollar, and the psychological barrier of 7.00/$ is within walking distance.

Tuesday’s Chinese corporate earnings reports could provide more clues about the health – or otherwise – of the real estate and financial sectors, as ICBC, Bank of China, China Construction Bank and China Resources Land all released first-half results.

Japanese jobs data is the main release in Asia’s overall calendar on Tuesday – the unemployment rate is expected to remain steady at 2.6% – while higher rates are expected to drag down Australian homebuilders approvals.

Key developments that should provide further guidance to the markets on Tuesday:

Unemployment in Japan (July)

Australian Building Approvals (July)

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Additional reporting by Jamie McGyver in Orlando, Florida. Edited by Paul Simao

Our Standards: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed under the Trust Principles to impartiality, independence, and freedom from bias.

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