ASIA SHARES A TAD HIGHER, BOND YIELDS UP
Asian share markets inched higher on Monday, February 22, 2021, as expectations for faster economic growth and inflation globally batter bonds and boost commodities, though rising real yields also make equity valuations look more stretched in comparison, Wayne Cole reported for Reuters.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%, after easing from a record top late last week as the jump in U.S. bond yields unsettled investors. Japan’s Nikkei recouped 1.0% and South Korea 0.4%, while E-Mini futures for the S&P 500 were a fraction firmer.
Bonds have been bruised by the prospect of a stronger economic recovery and yet greater borrowing as President Joe Biden’s $1.9 trillion stimulus package progresses.
Yields on 10-year Treasury notes have already reached 1.36%, breaking the psychological 1.30% level and bringing the rise for the year so far to a steep 41 basis points.
Analysts at BofA noted 30-year bonds had returned -9.4% in the year to date, the worst start since 2013.
“Real assets are outperforming financial assets big in ‘21 as cyclical, political, secular trends say higher inflation,” the analysts said in a note. “Surging commodities, energy laggards in vogue, materials in secular breakouts.”
One of the stars has been copper, a key component of renewable technology, which shot up 7.7% last week to a nine-year peak. Even the broader LMEX base metal index climbed 5.5% on the week.
Oil prices have gone along for the ride, aided by tightening supplies and freezing weather, giving Brent gains of 21% for the year so far.
Early Monday, Brent crude futures were up 43 cents at $63.34 a barrel, while US crude added 11 cents to $59.35, all of which has been a boon for commodity linked currencies, with the Canadian, Australian and New Zealand dollars all sharply higher for the year so far.