US Treasury yields subside to take dollar off 13-and-a-half year peak
TOKYO: US Treasury yields eased on Thursday as a week-long surge that followed Donald Trump’s shock election win subsided further, dragging the dollar off a 13-1/2 year peak set overnight and nudging Asian stocks a touch higher.
Spreadbetters saw the modest bounce for equities continuing in Europe, forecasting a slightly higher open for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI.
Japanese government bond yields also fell back from multi-month highs after the Bank of Japan conducted a special fixed-rate bond buying operation for the first time, firing a warning shot against excessive yield moves.
The dollar index, which measures the greenback’s strength against a basket of major currencies, stood at 100.280 .DXY after climbing to 100.570 overnight, its highest since April 2003.
The dollar has soared since Trump was elected president last week, as investors eyed the prospect of US interest rates rising faster than previously expected due to his plans for an expansionary fiscal policy that would stoke inflation.
But the rout in US bond prices began to slow, with the benchmark 10-year note yield US10YT=RR pulling back to 2.197 per cent in Asian trade after touching an 11-month high above 2.3 per cent earlier in the week.
“The Trump-related move in fixed income has been very strong while information flow about the path of economic policy has not been. It’s perhaps not surprising then that the rates market took a breather,” wrote Sharon Zollner, senior economist at ANZ.
“The price action in fixed income suggests that the market has moved sufficiently for the time being, which raises the possibility that the dollar’s rise may be due for a period of consolidation.”
Global debt markets, at the mercy of surging US yields until earlier in the week, began to regain some calm.
German and British benchmark yields have receded after peaking at ten-month and five-month highs, respectively, earlier in the week.
Japan’s 10-year yield JP10YTN=JBTC was steady at 0.015 per cent after rising to a nine-month high of 0.035 per cent on Wednesday. Yields were knocked back after the BOJ offered to buy an unlimited amount of JGBs of certain maturities in a special operation.
BOJ Governor Haruhiko Kuroda said on Thursday he does not have to accept gains in JGB yields simply because US Treasury yields are rising.
The Japanese central bank announced in September that it will aim to keep the benchmark yield pinned around zero per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS nudged up 0.1 per cent. It was still down about 1 per cent on the week as the prospect of higher US interest rates pulled money away from emerging markets.
Japan’s Nikkei .N225 dipped 0.1 per cent after touching a nine-month high on Wednesday on the yen’s sharp fall.
“In the Japanese market, as stocks have risen too fast, profit-taking is not surprising,” said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo.
In currencies, the dollar was flat at 109.060 yen JPY= after touching a five-month high of 109.760 overnight.
The euro EUR= added 0.1 per cent from Wednesday to stand at $1.0702 after setting an 11-month low of $1.0666 overnight.
Crude oil prices eased as a bigger-than-expected US crude inventory build outweighed hopes for a producers’ freeze on output following Russia’s comments about a possible meeting with Saudi Arabia.
Brent crude was down 0.2 per cent at $46.55 a barrel LCOc1.
Gold nudged up slightly as the dollar consolidated. Spot gold XAU= inched up 0.1 per cent to $1,226.10 an ounce, moving further away from the five-month low of $1,211.08 set on Monday.
Gold had still lost roughly $100 an ounce from last Wednesday’s post-US election high on the back of the sharp rise in bond yields and burgeoning appetite for risk.