Treasury yields hold near multi-year highs as markets enter final quarter

  • Asian markets began the final quarter with muted trading and bonds in focus.
  • US Treasury yields reached fresh peaks overnight and stayed near them in Asia.
  • BOJ Tankan showed Japanese business confidence reached an eight-year high in July-September.

Asian markets entered the final quarter on Thursday with subdued trading, while bond markets remained central as Treasury yields stayed near multi-year highs. A slower-than-expected rise in US inflation in August, alongside a downward revision to July's reading, reduced some expectations for a Federal Reserve rate hike this month but did not prevent Treasury yields from reaching fresh overnight peaks and remaining near them in Asia. Stalled US-Iran peace talks aimed at ending the seven-month-long war in the Middle East added to concerns about the global inflation outlook, while prices rose faster than expected in some of the euro zone's largest economies. Micron Technology's stronger-than-expected quarterly revenue forecast and increased customer commitments under long-term supply agreements, reaching $32 billion, failed to improve sentiment in Asia, where trading was thinner because Hong Kong and China were closed for a holiday. A Bank of Japan (BOJ, Japan's central bank) Tankan survey showed Japanese business confidence reached an eight-year high in July-September amid elevated inflation expectations, supporting the case for interest-rate increases. A summary of opinions from the BOJ's September meeting, where policymakers raised borrowing costs to a 31-year high, showed that some officials favored faster tightening or moving rates closer to the central bank's desired level sooner. Markets will also assess UK nationwide house prices for September, France and Germany's September S&P manufacturing purchasing managers' indexes, and the euro zone's August unemployment rate.

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