A global bond selloff intensified on Thursday, pushing Japan’s benchmark yields to their highest levels in over a decade. The surge in bond yields was triggered by significant selling in German bunds, spreading across global fixed-income markets. Despite the bond turmoil, Asian equities saw a boost due to a delay in U.S. tariffs on Mexico and Canada.
Global Bond Selloff Puts Pressure on Markets
Thursday saw a sharp rise in bond yields across several regions, notably in Japan, where the 10-year yield climbed to 1.5% for the first time since June 2009. This spike comes amid growing inflation concerns and higher borrowing costs. Meanwhile, U.S. Treasuries experienced a drop, pushing the U.S. 10-year yield higher for a third consecutive day, now trading around 4.3%. The bond selloff was not limited to Japan and the U.S.; Australia and New Zealand also saw their bond yields surge by approximately 10 basis points.
The bond market volatility is a direct response to rising geopolitical tensions and uncertainty surrounding U.S. support for Ukraine and fluctuating tariff discussions. Furthermore, Germany’s aggressive spending plan, which has been a topic of much debate, has also weighed on global fixed-income markets. German Chancellor-in-waiting, Friedrich Merz, made headlines by declaring that the country would take whatever actions were necessary to defend itself—a phrase that echoes European Central Bank President Mario Draghi’s famous 2012 pledge to save the euro. Citi strategists pointed out that this declaration, rather than being reassuring, has raised concerns about bond valuations.
German Bond Yield Surge Sends Shockwaves Across Markets
The catalyst for this selloff was the unexpected drop in German government bonds, with the yield on the 10-year bund jumping 30 basis points, marking its most significant rise since 1990. This led to a strengthening of the euro, reaching levels not seen since November 2024. Germany’s increased defense spending also helped boost European and Asia-exposed stocks, with market participants betting on economic stimulus measures.
A notable development in bond markets was the wiping out of year-to-date gains on euro-denominated investment-grade corporate bonds, as per a Bloomberg index. The bonds are now showing a loss of 0.2% in 2025, after a major decline on Wednesday—the largest since June 2022.
Equity Markets Show Resilience Amid Bond Volatility
Despite the turmoil in the bond market, equity markets in Asia showed resilience. Japan’s Nikkei, South Korea’s Kospi, Hong Kong’s Hang Seng, and India’s Sensex all reported gains. The Hang Seng China Enterprises Index surged by 3.1%, reflecting growing investor optimism about potential supportive measures to be announced at a joint press conference by Chinese government ministries in Beijing.
On the back of Chinese officials announcing a 5% expansion target for 2025, equity markets in the region saw positive momentum. This marks the third consecutive year that China has set this growth target, signaling the government’s strong resolve to drive economic growth despite ongoing trade tensions.
U.S. Equities Struggle with Tech Stock Disappointments
In the U.S., equity futures showed a decline, particularly in tech stocks. Marvell Technology Inc. posted a disappointing revenue forecast, sending its shares lower in after-hours trading. Broadcom Inc., another key player in the semiconductor sector, also dropped 3.5% after its earnings report failed to meet investor expectations related to the AI boom.
The broader market was impacted by concerns over the ongoing tech slowdown and disappointing earnings reports. However, on a more positive note, U.S. President Donald Trump’s decision to delay auto tariffs on Mexico and Canada offered some relief to investors.
Currency Movements and Global Trade Concerns
The U.S. dollar index remained steady after dropping 1% on Wednesday, with significant losses observed against the euro. The yen gained 0.6%, climbing to just below 149 yen per dollar, while the offshore yuan strengthened by 0.3% to 7.2445 per dollar. These moves reflect the global market’s focus on geopolitical issues and their potential impact on trade and currency stability.
Commodities Show Mixed Performance
In commodities, oil prices saw a modest increase, rising 0.5% to $66.67 per barrel. Meanwhile, gold remained steady near its record highs, maintaining its appeal as a safe-haven asset amid global market uncertainties.
Upcoming Key Events and Data
As the week progresses, several significant economic events are set to take place. The European Central Bank will announce its interest rate decision, which could have major implications for the eurozone economy. U.S. economic data, including initial jobless claims and wholesale inventories, will be released on Thursday, with Friday marking the release of the much-anticipated U.S. jobs report. These data points are likely to influence market expectations and volatility moving forward.
Other major events to watch include speeches from key Federal Reserve officials, including Fed Chair Jerome Powell and Treasury Secretary Scott Bessent, who will address the public on economic outlooks and monetary policy.
Market Summary
In stock movements, Japan’s Topix rose by 1.1%, while Australia’s S&P/ASX 200 fell by 0.7%. Hong Kong’s Hang Seng Index saw a 2.5% increase, while the Shanghai Composite also gained 1.1%. On the other hand, U.S. equity futures dipped slightly, with the S&P 500 futures down by 0.1%.
Cryptocurrency Updates
Cryptocurrency markets saw positive gains, with Bitcoin rising by 1.4%, now trading at $91,631.81. Ether also gained, increasing by 2.5% to reach $2,291.68, reflecting growing investor interest in the digital asset space.
Bonds and Commodities: A Snapshot
Bond yields saw significant movements, with the yield on U.S. 10-year Treasuries advancing by 4 basis points to 4.32%. Australia’s 10-year bond yield surged by 12 basis points to 4.48%. In the commodities market, crude oil rose 0.5%, while gold prices held steady.
For ongoing updates on the global markets, be sure to check Coleman News for the latest developments.
