Asia shares fall as Treasury yields hit fresh highs

Shares in Sony Group slumped to their lowest level since late October, losing more than 10 per cent after gaming rival Microsoft said it will buy developer Activision Blizzard.

Elsewhere, South Korea’s Kospi lost 1.0 per cent, while China’s blue-chip index was down 0.6 per cent despite expectations of more central bank policy easing. Hong Kong’s Hang Seng index bucked the downtrend to trade flat.

Two-year Treasury yields, which track short-term interest rate expectations, were last at 1.069 per cent, after hitting as high as 1.075 per cent, the highest since February 2020, as traders positioned for a more hawkish Federal Reserve ahead of the US central bank’s policy meeting next week.

“The speed of the short-rate move … is raising concerns that Asia is going to have follow very quickly in hiking rates,” said Sean Darby, global equity strategist at Jefferies.

The prospect of higher US rates also played out elsewhere in fixed income markets, with longer-dated US Treasury yields hitting fresh two-year highs.

Ten-year yields were up about 1 basis point at 1.8842 per cent after hitting as much as 1.890 per cent, while five-year yields were at 1.682 per cent, also holding near new two-year highs recorded early in the session.

“It seems as if rates are following the typical historical pattern of increasing into the first Fed hike of the cycle,” Rodrigo Catril, a senior FX strategist at National Australia Bank, said in a note.

“Another surge in oil prices and ongoing repricing of Fed hike expectations are themes playing in the rates space with the US dollar broadly stronger, benefiting from the combination of higher US Treasury yields and spike in risk aversion,” he added.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down a tad at 95.669.

The Australian dollar was just below its 50-day moving average at $0.71915, while sterling held steady at 1.3609.

It will be in focus later on Wednesday when British inflation figures are due, with annual headline inflation expected to reach its highest in almost a decade of 5.2 per cent.

Oil prices rose for a fourth day as an outage on a pipeline from Iraq to Turkey added to worries about an already tight supply outlook amid geopolitical troubles involving Russia and the United Arab Emirates.

US crude jumped 1.36 per cent to $86.59 a barrel. Brent crude rose 1.21 per cent to $88.57 per barrel.

Gold was slightly lower. Spot gold traded at $1,811.35 per ounce.

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