Asian shares gain as Treasuries find support

The Star

23-05-2025

SYDNEY: Asian shares gained on Friday as beaten-down Treasuries found buyers after U.S. President Donald Trump's tax bill narrowly passed the lower house, although debt worries still dominated.
European shares are similarly poised for a higher open, with EUROSTOXX 50 futures up 0.2% and FTSE futures 0.3% higher. Nasdaq futures and S&P 500 futures were both flat.
Overnight, PMI data around the globe showed U.S. business activity picked up pace in May, which helped Wall Street rise earlier in the session before running into selling pressures and closing the day little changed. In contrast, disappointingly weak activity in Europe dragged shares there lower.
The Republican-controlled U.S. House voted by a slim margin to pass Trump's tax cut bill, which would fulfil many of his campaign pledges, but will increase the $36.2 trillion U.S. debt pile by $3.8 trillion over the next decade.
Treasury yields, especially at the longer-dated end, have climbed on worries about U.S. fiscal health in the run-up to the passage of the bill. That was exacerbated by the decision from Moody's last week to downgrade the U.S. credit rating, citing rising debt.
The 30-year bonds, however, did manage to find some buyers with prices now at some attractive levels. Their yields fell another 1.6 basis point to 5.048% on Friday, having dropped 2.5 bps overnight to pull away from a 19-month top of 5.161% earlier in the session.
They are still up 15 bps this week.
"Maybe the certainty of getting something through has been enough to alleviate some of the fear, panic in the market, but as well as that, it is not unusual in big moves for there to be a bit of overshoot," said Ken Crompton, senior interest rate strategist at the National Australia Bank.
"There is certainly nothing in this market move or the passage of this version of the bill that tells me there is going to be meaningful reductions in U.S. bond issuance or this broader concern about global bond supply."
In Asia, yields on super-long Japanese government bonds (JGBs) also retreated from their highs. The 30-year yields fell 5 basis points to 3.115%, after hitting all-time highs earlier in the week, with the jump being monitored closely by the Bank of Japan.
The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5% on Friday, which helped it erase earlier losses in the week.
Chinese blue chips were flat but Hong Kong's Hang Seng rose 0.6%.
Japan's Nikkei gained 0.5% as data showed Japan's core inflation accelerated at its fastest annual pace in more than two years in April.
In the currency market, the dollar was on the back foot again and is headed for a weekly drop of 1.3% against its major peers. The euro is set for the first weekly rise after four weeks of declines, and was up 0.3% on Friday at $1.1309.
U.S. Federal Reserve Governor Christopher Waller said on Thursday he still sees a path to rate cuts later this year, but noted that the outlook depends on where Trump's tariff policy settles.
Separately, a U.S. Supreme Court ruling on Thursday in a legal battle over Trump's firing of two federal labor board members contained a line that eased, for now, worries that the cases could open the door for the president to fire Fed Chair Jerome Powell at will.
Bitcoin prices dipped from its record high but it was still set for a weekly gain of 6.4% to $110,796.
Oil prices fell for a fourth straight session on the prospect of further output increases by OPEC+ countries. U.S. crude futures dropped 0.5% to $60.89 a barrel and were down 2.6% for the week.
Brent also slipped 0.5% at $64.15 per barrel.
In precious metals, gold prices rose 0.7% at $3,317 an ounce, and were set for a weekly gain of 3.6%. - Reuters