Asian shares advance as USA bond yields push dollar higher

The Federal Reserve is expected to raise short-term interest rates at least twice more this year and three times in 2019, in an effort to tap the economy’s brakes.

The dollar camped near seven-week highs against a basket of currencies on Tuesday after it gained a boost from the rise in the U.S. 10-year Treasury yield toward the psychological barrier of 3 percent.

There aren’t any major economic releases on Wednesday, but investors should continue to watch US interest rates, the dollar and the stock market. If sustained or pushed higher, it could lead to higher mortgage and business loan interest rates.

U.S. BOND YIELDS: The yield on the 10-year Treasury note drew close to 3 percent on Monday, a milestone it has not reached since January 2014.

While its a bit early for investors to pack in the consensus short dollar view, the weaker shorts are indeed getting pared as the USD is showing some vigour tracking US Bond yields higher. The yield has climbed on expectations of a steady US economic expansion, accelerating inflation and concerns about increasing debt supply. “They feed into inflation”, said Rob Waldner, chief strategist at Invesco Fixed Income in Atlanta.

“4 – According to Seamus Mac Gorain from JPMorgan Asset Management, “[We] expect 10-year Treasuries to end the year between 3 and 3 ½ percent.

Many market analysts contend the 10-year US Treasury yield could surge to 3.4%. With oil inventories set to fall below their five year average in the coming months, fresh sanctions on Iran would further tighten supply in the oil market and likely boost oil prices.

Even with the bouts of volatility for stocks in February and March, U.S. equities are facing their longest losing streak thus far in 2018. It plunged 5 percent Monday after the United States gave American customers of Russia’s biggest aluminium producer Rusal more time to comply with sanctions.

ENERGY: Benchmark U.S. crude oil gained 18 cents to $68.82 a barrel. Natural gas stayed at $2.74 per 1,000 cubic feet.

S&P 500 futures were recently down 0.3% after the index slid 1.3% Tuesday, hit by a warning from heavy-machinery manufacturer Caterpillar that first-quarter results could be a “high-water mark” for the year and 3M narrowed its revenue and profit forecast for the year amid higher raw materials costs.

The 10-year yield flitted around 3 percent on Wednesday.

The CAC 40 in France gained 0.5 percent.

Palladium fell for a third straight session, down 0.9 percent at $965.70 an ounce.

The Australian dollar is getting hammered by the abrupt rise in US Treasury Yields.

Australian stocks were flat and Japan’s Nikkei rose 0.4 percent.

The euro was steady at $1.2209 after it pared its losses when it fell to $1.2185 earlier. Hong Kong’s Hang Seng added almost 1.0 percent to 30,554.07, while the Shanghai Composite jumped 1.7 percent to 3,120.27, recouping losses from the previous day.