EMERGING MARKETS-Asian stocks, bonds sold off as U.S. Treasury yields spike

  • Reuters
  • Stock Market News
EMERGING MARKETS-Asian stocks, bonds sold off as U.S. Treasury yields spike
Credit: © Reuters.

* Graphic: World FX rates http://tmsnrt.rs/2egbfVh

* Graphic: Foreign flows into Asian stocks https://tmsnrt.rs/3f2vwbA

* Further equity market turmoil expected if yields rise more -OCBC

* India's 10-year bond yield at highest since May 2020

* Malaysian 10-year bond yields hold above 3% mark

By Rashmi Ashok

Feb 26 (Reuters) - Asian equities dropped further and bond yields rose on Friday after U.S. Treasury yields jumped, as prospects for higher inflation and economic growth increased, making investors doubt that central banks would retain ultra-low interest rates for a longer period.

Overnight, the benchmark 10-year U.S. yield US10YT=RR touched its highest in a year at 1.614%, causing a sell-off in U.S. equities.

"The bond market is signalling disbelief that the Fed could continue keeping rates at such low levels in the face of a recovering economy and rising commodity costs," analysts at OCBC wrote in a note.

They warned that further turmoil in equity markets was expected if bond yields continued rising as investors looked to rebalance their portfolios.

Rising bond yields threaten the allure of stocks' dividend yield, while companies also face a higher debt-servicing burden because of steeper borrowing costs, making investing in the relatively riskier stocks less attractive overall.

India's 10-year bond yield IN10YT=RR climbed 6 basis points to its highest since early May last year at 6.242%, while Malaysian yields MY10YT=RR surged to 3.054%, hitting their highest since July 1, 2020.

Indonesian bonds ID10YT=RR also succumbed, with yields spiking almost 8 basis points to 6.617%. Yields had initially held steady after the country's finance minister said on Wednesday 2021 financing plans might be scaled back.

Equity markets in South Korea .KS11 and Taiwan .TWII , whose technology stocks have come under added pressure amid the spike in global bond yields due to fears they may be overvalued, bore the brunt of the sell-off, falling 3.3% and 2.9%, respectively.

Philippine stocks .PSI and the peso PHP= were the sole gainers in the region as trade resumed after a local holiday on Thursday. The rise came after a subdued performance through the week when regional stocks had seen bigger gains.

Malaysian stocks .KLSE also saw relatively thinner losses, after data showed exports rose 6.6% in January, while imports slowed slightly.

The growing view that ultra-low interest rates may be raised sooner than expected supported the dollar =USD , which put pressure on most Asian currencies.

The South Korean won KRW=KFTC slipped as much as 1.5% to a three-week low, while the Indonesian rupiah IDR= fell 0.9% to a more than nine-week low of 14,201 per dollar.

The Indian rupee INR=IN fell nearly 1% against the dollar. The currency was set to end the week 0.5% weaker, after six-consecutive weeks of strengthening amid improved economic outlook and dollar weakness.

Thai markets were shut for a local holiday.

HIGHLIGHTS:

** In the Philippines, top index gainers are Bank of the Philippine Islands BPI.PS , up 5.83%, and Robinsons Retail Holdings Inc RRHI.PS , up 4.72%

** Top losers on the Singapore STI .STI include: Venture Corporation Ltd VENM.SI , down 2.44%, and Dairy Farm International Holdings Ltd DAIR.SI , down 2.24%

** Indonesian 3-year benchmark yields are up 12.3 basis points at 5.419%​​

Asia stock indexes and

currencies at 0713 GMT

COUNTRY FX RIC

FX

FX INDE STOCKS STOCK

DAILY YTD %

X DAILY S YTD

%

%

% Japan

JPY=

+0.05 -2.75 <.N2 -3.99 5.55

25>

China

S>

EC>

India

INR=IN

-0.94 -0.05 <.NS -3.17 4.55

EI>

Indones IDR=

-0.85 -1.13 <.JK -1.24 3.89 ia

SE>

Malaysi MYR=

-0.23 -0.68 <.KL -0.08 -2.88 a

SE>

Philipp PHP=

+0.72 -1.21 <.PS

0.58 -4.83 ines

I>

S.Korea

C>

11>

Singapo SGD=

-0.28 -0.60 <.ST -0.95 3.57 re

I>

Taiwan

TWD=TP

+1.49 +2.30 <.TW -3.03 8.29

II>

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