Global Markets Fall After Bond Yields Surge

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International stocks dropped Friday, tracking declines in U.S. indexes, as a selloff in bonds helped dent investor appetite for richly valued shares.

However, U.S. Treasury notes rose in price, regaining some of the previous session’s losses, and futures suggested stocks in New York could stabilize or gain slightly in Friday trading.

Investors said the market had been reassessing prospects for interest-rate increases by the U.S. Federal Reserve, despite assurances from Chairman

Jerome Powell

that the central bank won’t raise rates anytime soon.

“What has happened in recent weeks is the markets have had to reprice expectations of the Federal Reserve’s rate hikes,” said Dwyfor Evans, head of macro strategy for the Asia-Pacific region at State Street Global Markets in Hong Kong.

He said the pickup in bond yields would have knock-on effects on areas such as corporate lending and mortgage rates. “That’s why equities will come under pressure here, because rising yields will have some impact on the real [economy] and earnings might have to slow,” Mr. Evans said.

By early afternoon Friday in Hong Kong, major benchmarks there and in Japan had fallen more than 2%, as had China’s CSI 300 Index, which includes large stocks listed in either Shanghai or Shenzhen. South Korea’s Kospi Composite fell more than 3%.

In Asia, as in the U.S., some of the biggest declines came in highflying technology shares.

SoftBank Group,

Samsung Electronics


Taiwan Semiconductor Manufacturing Co.

all dropped more than 3%, while Chinese food-delivery giant Meituan tumbled 5.9%.

Higher bond yields suggest the U.S. economy is returning to normal, which should bode well for corporate earnings. But they also improve the relative appeal of bonds compared to stocks, and can cause investors to reassess how much they should pay now for expected future profits—a particular problem for fast-growing tech stocks.

“Given the market has already rallied over the past 10 months, you are seeing quite a bit of profit-taking,” said Ken Wong, a portfolio manager at Eastspring Investments. Mr. Wong said rising borrowing costs were already causing some market participants to unwind positions bought using leverage, while expensive valuations were also fueling caution.

As of Thursday, the MSCI AC World index traded at a price of 20 times expected earnings, according to Refinitiv data, a 37% premium to the average of the last 10 years.

On Thursday, the S&P 500 retreated 2.4% and the Nasdaq dropped 3.5%, as the yield on the 10-year Treasury note rose to a one-year high above 1.5%. Bond yields move inversely to prices.

But futures suggested the stocks selloff might not extend much further in U.S. markets Friday, with those on the S&P 500 declining 0.1% and Nasdaq-100 futures down 0.5%.

In Asian trading, the yield on the 10-year Treasury declined 0.017 percentage point to 1.498%, according to Tradeweb.

Some regional bond markets followed Thursday’s U.S. selloff, with Australian benchmark yields rising to 1.87%, the highest since 2019.

In Japan, 10-year yields also hit a multiyear high, at 0.16%. Since 2016, the Bank of Japan has kept 10-year rates at around zero under its yield-curve control policy, though in recent years it has permitted rates to overshoot or undershoot by as much as 0.2 percentage points.

Write to Xie Yu at

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