Asian stocks higher after US Treasury stems bonds rout

Global bonds steadied have after the US Treasury stepped in to stem a rout in its bond market, soothing investor nerves and sending the dollar lower while stocks climbed.

The US Treasury announced overnight it will double buyback sizes for long-duration debt, as it sought to stem an upward march in yields that sent the 30-year Treasury yield to its highest level since 2007 earlier this week.

The 30-year yield was a touch lower at 5.1890 per cent in early Asia trade, having slid 9 basis points in the previous session, while the benchmark 10-year yield stood at 4.6466 per cent after a five bps fall on Wednesday.

"The timing of the announcement... was taken as a signal that officials are alert to pressure in long-end borrowing costs," said Taylor Nugent, senior economist at National Australia Bank.

"While it hasn't changed anything about the fundamentals, the announcement did sharply flatten the curve overnight."

In Tokyo, yields on Japanese government bonds (JGBs) similarly fell from multi-decade highs.

The 20-year JGB yield was down 7.5 bps to 3.700 per cent, while that of the 10-year JGB slid 4.5 bps.

Growing investor unease over mounting government debt had sparked a steep bond selloff from the US to Germany and Japan this week, exacerbated by heavy AI-related borrowing by technology companies and still-elevated oil prices.

While the US Treasury's announcement appeared to put a floor under falling bond prices for now, investors said the support was likely to be temporary.

"The more the (US) Treasury department wants to intervene, the more selling from institutional holders it will induce," said Cusson Leung, chief investment officer at KGI.

"At the end of the day, we know that the Treasury department is the one which needs to raise debt from the bond market. It doing a buyback now is like a company doing a share buyback first, followed by more share placement. The market is unlikely to fall for that."

The pick-up in market sentiment lifted stocks on Thursday, with MSCI's broadest index of Asia-Pacific shares outside Japan and Japan's Nikkei rising 1.2 per cent each. In South Korea, the KOSPI rebounded sharply in early trading, opening 3.23 per cent higher.

Nasdaq futures advanced 0.5 per cent, while S&P 500 futures edged 0.16 per cent higher. EUROSTOXX 50 futures eased 0.14 per cent.

The retreat in yields weighed on the US dollar, which languished near a two-and-a-half-month low against a basket of currencies at 98.86.