SINGAPORE, September 29, 2026 (DAILYNWZ) — Asian stocks came under pressure on Tuesday as a sharp selloff in government bonds pushed yields higher and oil prices climbed, with investors preparing for an expected Australian rate hike and a potentially higher-for-longer interest-rate environment.
The benchmark 10-year U.S. Treasury yield briefly rose above 5.27% overnight, its highest level in 19 years, bringing its September increase to nearly 50 basis points. Bond prices move inversely to yields, and the monthly decline in Treasury prices is on track to be the steepest in two years.
The two-year U.S. Treasury yield has risen even more sharply, gaining more than 57 basis points this month to approach 5%. Traders are increasingly pricing in the possibility that stronger U.S. growth and persistent inflation could lead the Federal Reserve to raise interest rates three more times by the middle of next year.
Government bond yields are closely watched across financial markets because they influence borrowing costs for companies and households and serve as a reference for pricing riskier assets such as stocks. Higher yields can also increase the cost of servicing government debt, putting additional pressure on public finances.
“The way to look at expected returns and overall bond yields going forward is we’re coming to a new environment,” said Angus Hui, head of fixed income at Fullerton Fund Management in Singapore.
“Interest expenses are increasing as a part of the government budget in a lot of developed markets,” Hui said, arguing that the pressure on sovereign finances could make it harder for bond prices to recover even if global economic growth weakens.
“Hence we think bond yields are unlikely to go back to the very good old days when bond yields were very, very low,” he added.
Asian bond markets in Japan, South Korea and Australia remained under pressure, while most regional stock indexes declined. U.S. equities had also struggled overnight, with the Nasdaq falling 0.9%. A $150 billion increase in chipmaker Nvidia’s planned share-buyback program helped support its stock and limited the broader decline in technology shares.
Oil added to the uneasy mood. With no sign of a breakthrough in the Middle East, Brent crude futures rose to $106.60 a barrel.
In China, technology stocks remained weak after shares fell on Monday following U.S. plans to ban Chinese components from data centers. The blue-chip CSI300 index was pinned near a one-year low.
The scale of spending planned by artificial intelligence companies is also drawing attention. U.S. AI company Anthropic is targeting a valuation of $2 trillion while planning to spend $518 billion on computing and infrastructure, according to its prospectus.
Currency markets were comparatively calm. The dollar was on course for a monthly gain, while the yen traded around 157.31 to the dollar after Japan’s top currency diplomat warned traders to heed coordinated concerns from Tokyo and Washington over the yen’s weakness. The euro stood at $1.1367 and the Australian dollar at $0.7012.
Australia’s central bank is widely expected to raise rates, with markets also pricing another increase by February.
“We question whether the governor can be sufficiently hawkish to frank the markets’ current mindset, especially if the decision is not unanimous,” Westpac rates strategists Damien McColough and Uma Choudhury said in a note.