Asian stocks fall as steep bond yields affect equities


On Wednesday, Asian stocks pulled further away from all-time highs due to the recent increase in international bond yields affected equities.

Asia-Pacific shares out of Japan .MIA0000PUS fell 0.1 percent following its recent all time high performance on Monday.

KOSPI of South Korea .KS11 shed 0.3 percent, in Japan, Nikkei. N225 also fell 0.3 percent while Australian stocks dropped 0.4 percent.

Wall Street recently reached all-time highs consecutively which led to an international rally of equities over the previous year all due to a robust global expansion bolstering steeper stock valuations and corporate earnings.

However, the recent rise in U.S. long term bond yields, which is close to four year peaks, have severely weighed on the rally.

United States market plunged for the second consecutive day on Tuesday, marking Downs largest two day decline since September of 2016, affected by healthcare stocks and the increasing bond yields.

According to Tokyo based IG Securities senior FX strategist  Junichi Ishikawa, the significant point is the speed that the yields are increasing, which is at an alarming rate. Until now, the increase in yields underpinned the financial sector, however, the rate of the increase now is too fast and is causing concerns regarding borrowing costs.

Steeper yields are affecting equities as they are pushing borrowing costs up and reducing risk appetite. Higher yields also provide new alternatives to investors, who may prefer to move some of their money from equities to bonds.


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