Bond Yields Climb, Stocks Under Pressure as Fed Cut Doubts Resurface

Tokyo – U.S. Treasury yields surged to a near four-week peak on Wednesday, impacting Asia-Pacific markets and the dollar. Equities faced pressure as new data raised doubts about the timing and extent of Federal Reserve rate cuts. Crude oil also rose to a four-week high amid speculation that OPEC+ would maintain production cuts in an upcoming meeting. Here are the key points:

• U.S. Treasury Yields: The benchmark U.S. 10-year yields reached 4.556% in Tokyo trading hours, a level not seen since May 3. Japanese yields hit their highest since December 2011, while Australian yields jumped to a more than three-week top.

• Consumer Confidence Surprise: Investors were caught off-guard by a sharp improvement in U.S. consumer confidence for May. Economists had predicted weaker confidence, but the unexpected data kept the market guessing about the strength of the economy and inflationary pressures.

• Market Expectations: Traders now put the odds of at least a quarter-point interest rate cut by September at 44%, up from a coin toss a day earlier.

• Currency Movements: The dollar rose to a four-week peak against the yen, while Australia’s dollar was bolstered by data showing an unexpected jump in local consumer inflation.

• Stock Markets: Regional stock markets were mostly lower, except for mainland China. Japan’s Nikkei slipped, Australia’s benchmark dropped, and Hong Kong’s Hang Seng tumbled. The U.S. S&P 500 futures also pointed lower.

• Energy Markets: Brent crude futures for July delivery rose, while U.S. West Texas Intermediate futures climbed.