Treasury Selloff Hits Asia on Pared Rate Bets: Markets Wrap

(Bloomberg) — Heavy selling in Treasuries Friday rippled across Asian debt markets early Monday, weighing on government bonds in Australia and New Zealand after US jobs data forced investors to push out rate cut bets.

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The 10-year Australian and New Zealand yields rose by around 10 basis points in early trading, after their US equivalent rose 14 basis points Friday. Those on two-year Treasuries jumped as much as 20 basis points to over 4.4%, the biggest one-day spike since March.

The dollar strengthened against major currencies early Monday.

The action Friday was driven by a nonfarm payroll report that showed US companies boosted payrolls in January by the most in a year, while prior months were also revised upward.

Investor bets for a rate cut in March by the Fed tumbled Friday to around 20% from almost 40% on Thursday, as economic resilience reduces the likelihood of imminent policy easing.

Despite forecasts for a March cut weakening, “this market still expects five rate cuts this year,” said Ed Yardeni, president of Yardeni Research, in a note. “Fed officials are likely to continue to push back against that notion of so much cutting,” he said.

Australian shares and Hong Kong futures fell, while contracts for Japan rose.

Investors will be looking for further clues on Fed policy when Chair Jerome Powell appears on CBS’s 60 Minutes at 7.00pm Eastern Time Sunday — that’s 8.00am in Hong Kong Monday.

Oil prices rose following US and UK strikes against Houthi targets over the weekend. The Iran-backed Houthis have vowed to respond. The price of West Texas Intermediate rose around 0.8% in opening trade Monday, after falling 7.4% last week, its largest one-week decline since October.

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In Asia, Australian trade balance and composite PMI data is set for release, ahead of Tuesday’s Reserve Bank of Australia interest rate decision. Elsewhere, PMI data is also due for Japan, India and China.

China Vows

Investors will be closely…