World stocks inch higher, Japanese super-long bond prices tumble

Asahi Shimbun

20-05-2025

SINGAPORE/LONDON--World stocks rose on Tuesday and Treasury yields steadied, allowing a bit of a breathing room for the U.S. dollar as investors took stock of the debt load of the world's biggest economy.
Investors were still processing Monday's market moves when Treasuries initially sold off sharply on worries about the U.S. fiscal position, and stocks struggled on Wall Street, before both rebounded in late trading.
That calm was maintained in Asian and European trading, where broad equity indices were each up around 0.1% and Germany's Dax hit a new record high, though S&P 500 share futures dipped.
Moody's late on Friday downgraded the U.S. credit rating, underscoring worries about the impact of a major tax cutting bill proceeding through Congress, which faces a crucial vote later this week.
The U.S. 10-year yield was last down 3 basis points at 4.44% having hit a one-month high of 4.56% on Monday, and the 30-year bond yield fell a similar amount to 4.91% after hitting an 18-month high of 5.037% in the previous session.
'The quick recovery was a bit of a surprise even though we were in the camp of it only having a limited impact,' said Mohit Kumar, chief Europe economist at Jefferies. He said the downgrade was not unexpected given concerns over U.S. debt and deficits.
However, in a sign of broader market nervousness, Japanese super-long bond yields soared to all-time highs on Tuesday, with the immediate precipitating factor a poor auction of 20-year securities.
The Japanese 20-year yield jumped as much as 15 bps to 2.555% its highest since 2000, and the 30-year yield hit a record high of 3.14%.
JGBs are no exception to the global trend of rising yields, said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp.
'Market participants are ... assessing demand during each auction, and stability remains elusive. I think that the upward pressure is likely to persist for the time being.'
UNEASY RBA
Global investors had a few other things to process too on Tuesday, and the Australian dollar slipped 0.5% to $0.64255 after the Reserve Bank of Australia lowered interest rates as expected, citing a darker global outlook, though it also remained cautious on further easing.
'With the RBA sounding increasingly uneasy, the path of least resistance for the currency may remain lower,' said Charu Chanana, chief investment strategist at Saxo in Singapore.
'Especially if domestic data softens further or global risks flare up again.'
China's blue-chip index climbed 0.6% after its central bank cut benchmark lending rates for the first time since October.
Also in the spotlight was a strong Hong Kong market debut from CATL, as the Tesla battery supplier started 12.5% higher. The firm raised $4.6 billion in its Hong Kong listing, the largest in the world this year.
Back in currency markets, the euro was up 0.2% at $1.1265, holding onto Monday's 0.6% gain, and the dollar was also down 0.38% against the Japanese yen at 144.27, again after sliding Monday.
In commodities, oil prices nudged higher as investors tried to get a grip on a potential breakdown in talks between the U.S. and Iran over Tehran's nuclear activity and weakened prospects of more Iranian crude supply entering the market.
Brent futures were last up 0.34% to $65.75 a barrel.
Gold slipped 0.2% to $3,220 per ounce as safe haven demand dipped.