Bond rout pushes cash back in to stocks

Singapore, March 23 (BNA): Asian shares hit a three-week high on Wednesday as cash escaping from troubled bond markets flowed into big tech and other battered sectors.

MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.6%, with Hong Kong, Seoul and Sydney all posting gains of similar size.

The index reached its highest level since March 4. Japan’s Nikkei jumped 2.5% to touch a two-month high, and the moves were followed by gains of 1.1% for the S&P 500 and about 2% for the Nasdaq in overnight trading.

Bond markets extended their decline as investors prepared for the Federal Reserve to take a more aggressive approach to taming inflation. Two-year Treasury yields rose 76 basis points in March, and 10-year yields increased nearly 60 basis points to 2.4154%, the highest level since 2019.

The sell-off, which began months ago, gained momentum in recent sessions after Federal Reserve Chairman Jerome Powell signaled the possibility of a larger-than-usual rate hike. As a result, the interest rate-sensitive yen fell to a six-year low of 121.41 per dollar on Wednesday.

“The move higher in yields spanning over the past two weeks was the largest since the global financial crisis and even then the moves were within two basis points of what we are seeing now,” said Jan Nefrozi, interest rate analyst at NatWest Markets. .

“At some point, the market may start pricing in an economic downturn, especially if the Fed embarks on a series of 50 basis point hikes.”

For now, investors are impressed by the economic strength of the United States and are betting that big companies with good cash flows can keep it.

“Big tech, with increased revenue and the ability to control costs, is doing well,” said George Poporas of K2 Asset Management in Melbourne.

Tech giants Tencent and Alibaba and food delivery giant Meituan led the Hang Seng tech index by more than 3%.

Bonds in Asia remained under pressure on Wednesday although selling moderated slightly. Australian 10-year government bond yields rose 3.5 basis points to 2.776%, and Japanese 10-year bond yields rose to 0.222%, close to testing the Bank of Japan’s 0.25% cap.

In the currency markets, analysts saw little hope of a reversal in the yen’s fortunes as the policy gap between Japan and the rest of the world widens and higher energy prices weighed on the country’s trade balance.

The yen lost 6% in a week against the Australian dollar, which benefited from higher prices for Australian merchandise exports.

The weakness of the US dollar helped the Australian and New Zealand dollars reach their highest levels against the dollar since last November, with the Australian dollar reaching $0.7477 and the New Zealand dollar reaching $0.6973.

The euro settled at 1.1031 dollars.

Oil settled at higher altitudes, with Brent crude futures up 0.5% to $116.13 a barrel, and US crude rising 0.6% to $107.23.

The grain remained buoyed by supply concerns.

HF