Aussie shares sink back into red as bond yields spike

The Australian share market has dropped sharply, falling back into the red once again for the year as bond yields spiked to their highest levels in decades.

Near midday on Thursday, the benchmark S&P/ASX200 index was down 80 points, or 0.89 per cent, to a week-and-a-half low of 8,687.5, while the broader All Ordinaries was down 71.9 points, or 0.8 per cent, to 8,884.5.

Overnight the 10-year US Treasury yield hit 5.11 per cent, its highest level since 2007, after new data showed strong business activity, intensifying inflation concerns.

Surging bond yields generally put pressure on share markets because government bonds are seen as nearly risk-free, so the prospect of higher returns from them makes equities look less attractive.

A defiant speech from Iranian officials at the UN General Assembly had also served to push up the price of Brent crude, said Pepperstone head of research Chris Weston.

Domestically, the Australian Bureau of Statistics released figures showing employment rebounded in August, which Betashares chief economist David Bassanese said was the final nail in the coffin for the Reserve Bank to raise interest rates next week.

At midday seven of the ASX's 11 sectors were lower and three were higher, with industrials basically flat.

Property was the biggest mover, dropping 1.7 per cent as Goodman Group slid 1.9 per cent.

The materials sector was down 1.6 per cent after gaining similarly the day before.

BHP had fallen 1.8 per cent, Rio Tinto had dropped 0.9 per cent and Fortescue was 0.4 per cent lower.

Goldminers were down as well as the yellow metal changed hands at $US4,319 an ounce.

Northern Star had retreated 2.5 per cent, Evolution had slipped 1.9 per cent and Regis had dropped 2.7 per cent.

In the heavyweight financial sector, all of the big four banks were in the red.

Westpac had lost 1.4 per cent, ANZ had dropped 1.1 per cent, NAB had fallen 1.1 per cent and CBA had retreated 1.0 per cent.