Global Bond Selloff Ramps Up, Asian Equities Rise: Markets Wrap

(Bloomberg) -- A global bond selloff accelerated in Asia on Thursday, pushing Japanese benchmark yields to the highest in more than a decade after heavy selling in German bunds spread across fixed income markets. Asian stocks were buoyed by a delay to some US tariffs on Mexico and Canada.

Japan’s 10-year yield touched 1.5% for the first time since June 2009, as the country manages rising inflation and higher borrowing costs. Treasuries fell, pushing the US 10-year yield higher for a third day to trade around 4.3%. Bonds in Australia and New Zealand also saw their yields surge around 10 basis points.

The moves show how geopolitical volatility over the past few weeks that includes fraying US support for Ukraine and whipsawing news on tariffs has impacted financial markets as traders gauge the impact on growth and inflation. Also weighing on the fixed-income markets is Germany’s historic plan to ramp up spending with Chancellor-in-waiting Friedrich Merz declaring his country would do “whatever it takes” to defend itself.

“The last time the bond market took note of a pledge to do ‘whatever it takes’ it came as relief,” Citi strategists led by Jamie Searle wrote, citing European Central Bank President Mario Draghi’s pledge in 2012 to save the euro. This time, however, it “comes as a warning to bond valuations.”

The selloff was sparked by a sudden drop in German bonds that sent 10-year bund yields 30 basis points higher Wednesday, the most since 1990. The euro strengthened to levels not seen since November. Germany’s spending plan also pushed Asia’s defense and Europe-exposed shares higher.

Year-to-date gains on euro-denominated investment-grade corporate bonds were wiped out on Wednesday, a Bloomberg index showed. The notes have now lost 0.2% so far in 2025, after suffering their biggest drop Wednesday since June, 2022.

Equity benchmarks in Japan, South Korea, Hong Kong and India all rose. The Hang Seng China Enterprises Index jumped as much as 3.1%, reflecting investors’ heightened expectations for more supportive measures that may be announced at Chinese government ministries’ joint press conference this afternoon in Beijing.

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On Wednesday, Chinese officials announced an expansion target of about 5% for 2025 at its annual parliamentary session, marking the first time in more than a decade Beijing had set the same goal for three straight years. President Xi Jinping signaled China’s determination to push ahead with an ambitious growth goal this year, despite the trade war.

The NPC’s message of focusing on technology innovation and consumption was encouraging and “should help to sustain the market’s momentum,” according to Morgan Stanley’s strategist Laura Wang.

US equity-index futures fell, weighed by tech stocks. Shares in Marvell Technology Inc. dropped in after-hours New York trading late Wednesday after delivering an underwhelming revenue forecast, disappointing investors expecting a greater payoff from the AI boom. Broadcom Inc., another chipmaker tied to the AI surge, fell 3.5% in after-hours trading ahead of its earnings report Thursday.

Meanwhile, the White House said auto tariffs on Mexico and Canada would face a one-month delay. After talks with Canadian Prime Minister Justin Trudeau, White House press spokesperson Karoline Leavitt said US President Donald Trump is open to hearing about additional tariff exemptions. 

An index of the dollar was steady after falling 1% Wednesday, weakening against most major currencies, with losses particularly stark against the euro. Overnight, the yen climbed around 0.6% to just below 149 per dollar.

Later Thursday, the European Central Bank and its counterpart in Turkey will hand down interest rate decisions. US data expected Thursday includes initial jobless claims ahead of Friday’s monthly payrolls figures. Options traders expect the S&P 500 to move 1.3% in either direction, in what would be the most for any jobs day since the regional bank turmoil in March 2023.

Oil edged higher from the lowest close in six months and gold was steady near its record high. 

Key events this week:

• Eurozone retail sales, ECB rate decision, Thursday
• US trade, initial jobless claims, wholesale inventories, Thursday
• US Treasury Secretary Scott Bessent speaks, Thursday
• Fed’s Christopher Waller and Raphael Bostic speak, Thursday
• Eurozone GDP, Friday
• US jobs report, Friday
• Fed Chair Jerome Powell gives keynote speech at an event in New York hosted by University of Chicago Booth School of Business, Friday
• Fed’s John Williams, Michelle Bowman and Adriana Kugler speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 12:41 p.m. Tokyo time
• Japan’s Topix rose 1.1%
• Australia’s S&P/ASX 200 fell 0.7%
• Hong Kong’s Hang Seng rose 2.5%
• The Shanghai Composite rose 1.1%
• Euro Stoxx 50 futures rose 0.5%
• Nasdaq 100 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0793
• The Japanese yen fell 0.2% to 149.14 per dollar
• The offshore yuan rose 0.3% to 7.2445 per dollar
• The Australian dollar rose 0.1% to $0.6342

Cryptocurrencies

• Bitcoin rose 1.4% to $91,631.81
• Ether rose 2.5% to $2,291.68

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.32%
• Australia’s 10-year yield advanced 12 basis points to 4.48%

Commodities

• West Texas Intermediate crude rose 0.5% to $66.67 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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