Climbing US yields overpower stocks rally

U.S. Treasury yields reached one-year highs on Wednesday at the expense of stock markets, gold, and the Japanese yen.  The stimulus-fuelled global recovery that will cause inflation to increase weighed on the markets causing investors to ease off.

Benchmark ten-year U.S. Treasury yields soared 1.3330% in Asia, the highest since February 2020, although they later receded to 1.2989%. The two-year yields gap also broadened as investors reckoned that short-term monetary policy will stay accommodative, even as the global economy rebounds from the pandemic.

In stock markets, Japan’s Nikkei dropped 0.7% and S&P 500 futures decreased 0.3%. Benefiting from higher yields was the Dow Jones, hitting a record closing high while the S&P 500 dropped 0.06% and the Nasdaq slipped 0.3%.

The bonds selloff has now increased by almost 40 basis points to U.S. 10-year yields this year.

Gold dropped for a fifth straight day as it tends to fall when yields rise while the yen is sensitive to U.S. rates because Japanese yields are anchored and higher U.S. returns can attract investment flows out of yen and into dollars.