Asian stocks fall after US Treasury yields close at 15-year high

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Stocks across Asia followed Wall Street lower on Thursday after 10-year US Treasury yields closed at their highest level since 2008 as minutes from the Federal Reserve’s last meeting suggested policymakers might continue to keep interest rates higher for longer to fight inflation.

The minutes from July’s meeting, in which the US central bank lifted rates to their highest level in 22 years, cited “significant upside risks to inflation, which could require further tightening of monetary policy”.

The prospect of interest rates staying higher for longer helped push 10-year Treasury yields to their highest close in 15 years in New York. They rose another 0.03 percentage points on Thursday in Asia to 4.278 per cent, the highest level since October, when the yield hit its highest point since 2007.

Asia-Pacific equities were lower on the prospect of extended monetary tightening, with Japan’s Topix index down 0.3 per cent, Hong Kong’s Hang Seng falling 0.1 per cent and Australia’s S&P/ASX 200 index down 0.6 per cent.

In China, where a benchmark interest rate was cut this week in the face of slowing economic growth, the CSI 300 index was down 0.1 per cent.

The falls for Asian stocks followed a sell-off on Wall Street, where the S&P 500 closed down 0.8 per cent and the tech-focused Nasdaq Composite shed 1.2 per cent.

Bloomberg data showed traders placed the probability of the central bank holding its federal funds rate steady at its next meeting in September at 88 per cent.

However, there is less certainty about how long it will take for interest rates to come down from historic highs.

“It doesn’t matter whether you think the Fed will or will not carry through with the lean in the Fed minutes,” said Stephen Innes, managing partner at SPI Asset Management.

“The fact is that 10-year yields are soaring, and in the modern-day playbook for stock market operators, that is bad news on multiple levels.”

In commodities markets, oil prices were steady after dropping almost 2 per cent on Wednesday, with Brent crude, the international benchmark, up 0.1 per cent at $83.55 a barrel.

Futures markets tipped the FTSE 100 to shed 0.4 per cent at the open in London, while the S&P 500 was expected to open flat later in the day on Wall Street.