Asia-Pacific stocks slip as 10-year U.S. Treasury yield surges

SINGAPORE — Shares in Asia-Pacific slipped in Wednesday morning trade, following an overnight surge in the U.S. 10-year Treasury yield.

The Nikkei 225 slipped 1.28% in morning trade while the Topix index fell 1.04%. South Korea’s Kospi dipped 0.89%.

Elsewhere, the S&P/ASX 200 in Australia declined 0.42%.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.35% lower.

Shares in mainland China are set to return to trade on Wednesday following holidays earlier in the week.

A private survey on Chinese services sector activity in March is also set to be out at 9:45 a.m. HK/SIN on Wednesday. That data release comes as China continues to battle its worst Covid outbreak since the beginning of the pandemic in early 2020.

Investors will continue to monitor moves in U.S. Treasurys on Wednesday. The 10-year Treasury rose to its highest level since May 2019 on Tuesday, hitting a high of 2.562% before settling at 2.55%.

The yield on the benchmark 10-year Treasury note last sat at 2.5749%, well above the 2-year Treasury note’s yield of 2.5486%. Yields move inversely to prices.

A topping of the 2-year Treasury yield against the 10-year rate has historically been observed ahead of recessions.

The 10-year Treasury yield jumped overnight after comments from U.S. Federal Reserve Governor Lael Brainard suggested an aggressive approach to shrinking the central bank’s balance sheet.

Shares on Wall Street fell overnight, with the S&P 500 declining about 1.3% to 4,525.12. The Dow Jones Industrial Average slipped 280.70 points, or 0.8%, to 34,641.18. The tech-heavy Nasdaq Composite lagged as it dropped 2.26% to 14,204.17.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 99.477 following a recent jump from below 99.

The Japanese yen traded at 123.65 per dollar, weaker as compared with levels below 123.3 seen against the greenback yesterday. The Australian dollar changed hands at $0.7586 after a recent drop from above $0.762.

Oil prices were lower in the morning of Asia trading hours, with international benchmark Brent crude futures declining 0.83% to $105.75 per barrel. U.S. crude futures shed 0.8% to $101.14 per barrel.