Asia Bonds Face Fed Fallout as Aussie, Kiwi Yields Soar to Highs




  • In Business
  • 2022-01-26 21:58:48Z
  • By Bloomberg
 

(Bloomberg) -- Asian bonds are tumbling Thursday after Federal Reserve Chairman Jerome Powell's latest hawkish pivot, with Australian and New Zealand benchmark yields spiking to fresh highs and signaling a rough day for markets across the region.

Most Read from Bloomberg

  • A Nor'easter Approaching New York Risks Becoming a Bomb Cyclone

  • Mark Zuckerberg's Stablecoin Ambitions Unravel With Diem Sale Talks

  • Stocks Drop, Yields Jump on Hawkish Powell Signals: Markets Wrap

  • Astronomers Spot Never-Before Seen Object at 4,000 Light-Years Away

  • Stock Rebound Fails and Futures Plunge on Earnings: Markets Wrap

Australia's 10-year yield jumped 11 basis points to 2.06%, a level last seen in October when the country's bond market melted down. New Zealand's 10-year notes slumped to send the yield to 2.70%, the highest since November 2018. Similar-dated Treasuries traded 10 basis points higher at 1.87%.

The Australian and New Zealand dollars each dropped more than 0.5% as investors anticipated a steeper pace of U.S. tightening after Powell said the Fed is ready to raise interest rates in March and didn't rule out moving at every meeting to wrestle inflation back down.

"We look to be in for a potentially faster and larger hike cycle than was previously thought," said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney. "Powell made no mention of 'gradual' or any other disclaimer. Yields will push higher today and over coming days, with the curve bear flattening."

Read More: Powell Backs March Liftoff, Won't Rule Out Hike Every Meeting

The Fed's aggressive stance is expected to push other central banks across the globe to accelerate their efforts to wind back the unprecedented monetary stimulus they deployed to combat the impact of the Covid-19 pandemic. Swaps futures show traders are forecasting the Reserve Bank of New Zealand will raise rates by a percentage point within six months.

Data early Thursday showing New Zealand inflation accelerated to the fastest pace in more than 31 years in the fourth quarter will reinforce bets that the central bank will keep raising interest rates.

The selloff in Australian bonds comes as some investors expect the nation's central bank to scrap quantitative easing next Tuesday. Such a move would likely set off fresh speculation that the Reserve Bank of Australia will be forced to abandon its insistence on holding the cash rate target at a record low until 2023 or later.

(Adds moves in Australian yields, N.Z. inflation data)

Most Read from Bloomberg Businessweek

  • Market Turmoil Is Ultimate Test of What's Real and What's Not

  • What Happens When Russian Hackers Come for the Electrical Grid

  • The Tragicomedy of Boris Johnson Enters Its Final Act

  • Pharmacy Workers Are the Pandemic's Invisible Victims

  • The Charismatic Developer and the Ponzi Scheme That Suckered San Diego

©2022 Bloomberg L.P.

COMMENTS

More Related News

Lagarde Says Crypto Is
Lagarde Says Crypto Is 'Worth Nothing' and Should Be Regulated

(Bloomberg) -- European Central Bank President Christine Lagarde said crypto-currencies are "based on nothing" and should be regulated to steer people away...

Singapore Still Rules China Futures Market as Hong Kong Edges In
Singapore Still Rules China Futures Market as Hong Kong Edges In

(Bloomberg) -- Six months after Hong Kong introduced equity index futures to make it easier for international investors to bet on Chinese stocks, Singapore...

BitMEX Founder Hayes Avoids Prison on Bank Secrecy Charge
BitMEX Founder Hayes Avoids Prison on Bank Secrecy Charge
  • US
  • 2022-05-20 23:22:41Z

(Bloomberg) -- BitMEX co-founder Arthur Hayes was spared from prison despite admitting he failed to guard against money laundering at the pioneering...

On The Money - Prices remain high while stocks sink
On The Money - Prices remain high while stocks sink

Food prices could increase even more amid international export bans. We'll also look at this week's stock market carnage, IRS changes and the continued push ...

Retailer Rout Erased $500 Billion, Stirs Worry of More Ahead
Retailer Rout Erased $500 Billion, Stirs Worry of More Ahead

(Bloomberg) -- The wild swings in consumer stocks this week that erased about $500 billion in market value are far from over with earnings reports from well-...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business