By Johann M Cherian
SINGAPORE (Reuters) – Longer-dated U.S. Treasury yields hit their highest in 18 months on Thursday, while Asian stocks and the dollar slipped as worries of a worsening fiscal outlook in the world’s biggest economy weighed on investor sentiment.
The spotlight remains on U.S. President Donald Trump’s tax bill that is expected to be voted on this week in Congress and investors are worried it could add about $3.8 trillion to the $36 trillion U.S. debt pile.
The dour mood among investors after Moody’s downgraded the U.S. credit rating last week has left markets slightly listless as a “Sell America” narrative gains traction, with the greenback hovering near its lowest in two weeks against other major currencies. [FRX/]
Investors have also been looking for options outside the U.S. based on expectations it would not be immune in the event of a global recession spurred by Trump’s erratic trade policy.
“We continue to have uncertainty and worries about growth and worries about the ability of the U.S. government to raise more debt,” said Vis Nayar, chief investment officer at Eastspring Investments in Singapore.
“We’re not expecting some sort of mean reversion back toward dollar strength, but longer term that all leads to diversification into these emerging market countries.”
Investor reluctance about buying U.S. assets was evident on Wednesday after the U.S. Treasury Department saw tepid demand for the $16 billion sale of 20-year bonds that pushed bond yields higher.
Yield on 30-year Treasury bonds stayed above 5% after hitting a 1-1/2 year high earlier in Asian hours. [US/]
That weighed on stocks in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan 0.5% lower, though still near the seven-month high it touched in the previous session.
Japan’s Nikkei was down 0.7% on the stronger yen. China’s benchmark index slipped 0.2%, while Hong Kong’s Hang Seng index declined 0.8% in early trading.
Still, analysts have said market sentiment has been buoyed lately by economic data indicating resilience in the face of trade uncertainty brought on by Trump’s tariff salvos.
This could be put to the test with business activity surveys due out of Japan, the euro zone and the U.S. later on Thursday.
The modest progress to date on trade deals has also kept investors jittery.
Attention will also be on a Group of Seven meeting in Canada, where finance ministers put a positive spin on discussions to try to reach an agreement on a joint communique largely covering non-tariff issues.
Investors have also been scouring for any hints that currency markets could be part of trade negotiations, though the U.S. and Japan agreed on Wednesday that the dollar-yen exchange rate currently reflects fundamentals.
Meanwhile, bitcoin, rose for the fifth-straight session and touched a record high of $110,636.58 as the world’s most valuable cryptocurrency recovers from the tariff-induced selloff last month. It was last up 1.5%.
Oil prices eased on Thursday, following a strong surge in the previous session, after unexpected builds in U.S. crude and fuel inventories raised demand concerns. [O/R]
Gold prices edged up for the fourth-straight session, helped by a softer dollar and safe-haven demand. [GOL/]
(Reporting by Johann M Cherian; Editing by Jamie Freed)
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