By Satoshi Sugiyama and Tom Westbrook
TOKYO, Sept 1 (Reuters) - Selling drove global bond yields to major new highs on Tuesday as renewed fighting in the Middle East lifted oil prices above $90 a barrel and put pressure on stock markets around the world.
Japan's 10-year benchmark hit 3% for the first time in a generation. The 10-year U.S. Treasury yield, a benchmark for prices across asset classes, hit its highest since early 2025 at 4.78% and futures for French and German debt extended selling that
earlier drove yields to 15-year highs.
"I think there is now something of a sense of resignation — tinged with helplessness — about rising interest rates," said Ryutaro Kimura, a senior strategist at BNP Asset Management in Tokyo, of the march upward in Japanese borrowing costs, which for years have been a reliable anchor for world markets.
Higher oil prices and rising U.S.-Iran tensions are stoking worries about inflation, which is negative for bonds, just as Federal Reserve Chair Kevin Warsh has reset expectations for the outlook. At the same time skyrocketing sovereign borrowing has investors starting to demand higher premiums for lending.
U.S. and European equity futures dipped, after Wall Street notched modest Monday falls, and the mood was nervous ahead of U.S. jobs data on Friday which could open the door to an interest rate-hiking cycle starting as soon as this month.
"The macro mix is turning more challenging for duration and risk assets," said Wee Khoon Chong, APAC macro strategist at BNY.
"Hawkish monetary policy, renewed geopolitical and inflation risks, and rising fiscal concerns are converging to maintain the upward pressure on global term premiums and long-end yields."
SHEIN FADES, BRENT TOPS $91
Japan's Nikkei was pinned to flat by early afternoon and the Hang Seng fell 1%, with the weak tone set by the lacklustre debut of clothier Shein Global.
Brent crude futures, meanwhile, topped $91 a barrel in Asia trade while Europe's benchmark gas price closed at a more than 3-1/2-year high on Monday.
Conflict in the Middle East has left the energy and inflation outlook precarious and traders bracing for short-term rate rises.
U.S. President Donald Trump has threatened further strikes against Iran after the first exchange of fire in a month while stepped-up fighting between Russia and Ukraine has wheat prices trading close to three-year highs. [GRA/]
Markets are pricing an interest rate hike in New Zealand on Wednesday and an increase in Europe next week. Hikes this month in the U.S. and Japan are at better-than-even odds.
Because the rise in borrowing costs has been global, it has offered only limited support to the U.S. dollar.
The euro was steady at $1.1619 and the yen at 159.76 to the dollar. Preliminary inflation figures are due in Europe later on Tuesday.
In Hong Kong Shein shares slid 8% below an offer price already marked down from earlier fundraising rounds.
The fast-fashion retailer, known for its $5 tops and $10 dresses, has been hit by tariff and duty changes in the U.S. and Europe that have eroded a key pillar of its low-cost business model.
(Reporting by Satoshi Sugiyama in Tokyo and Tom Westbrook in Singapore; Editing by Shri Navaratnam and Muralikumar Anantharaman)
