Asian stock markets fell, US and Japanese long-term bond yields surged, the yen came under pressure, and spot gold held steady.

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A global bond selloff triggered by a surge in corporate debt issuance and concerns over the fiscal health of developed countries is intensifying, dragging down U.S. Treasuries and European bonds and spreading to the Japanese market.

On Wednesday, September 3, the yield on Japan’s 20-year government bond climbed to its highest level since 1999, while the 30-year bond yield hit a historic high. Meanwhile, the U.S. 30-year Treasury yield remains near 5% after surging on Tuesday and dragging down Wall Street stocks. In Europe, German long-term bond futures have fallen for the fifth consecutive trading day.

Higher yields have weakened the appeal of equities, causing Asian stock markets to come under broad pressure. In the foreign exchange market, domestic political uncertainty in Japan has led to a weaker yen, while the U.S. dollar index has risen for a second consecutive day. Spot gold is up 0.1%.

The Nikkei 225 Index fell 1% to 41,886.93 points. The TOPIX index fell 1%.Euro Stoxx 50 Index futures rose 0.3%. S&P 500 index futures were little changed.Taiwan Stock Exchange Weighted Index closed up 0.3% at 24,100.30 points.The euro was little changed at $1.1632.USD/JPY rose 0.13% to 148.52 yen.The 10-year U.S. Treasury yield rose two basis points to 4.28%.The yield on Japan’s 10-year government bond was flat at 1.625%.West Texas Intermediate crude fell 0.3% to $65.42 per barrel.Spot gold rose 0.1% to $3,537.08 per ounce.Bitcoin fell 0.3% to $111,050.86.

Debt Issuance Surge and Fiscal Deficit Concerns

Record corporate debt issuance is the immediate trigger for this round of selling. According to statistics, on Tuesday, global borrowers issued at least $90 billion worth of investment-grade debt, making it one of the busiest weeks of the year so far for the global credit market, with issuance in some markets close to or breaking records. Reportedly, European bond issuance in a single day reached a record 49.6 billion euros.

Strategist Garfield Reynolds noted that the global economy seems to have coped well with the pressure from President Trump’s tariff policies, but this has reignited worries that appeared in 2024—namely, that concerns over debt sustainability might push yields persistently higher over the next few years:

“The sharp rise in yields may limit any rebound in the stock market, as the constantly rising cost of borrowing is enough to damage corporate prospects.”

Despite the recent selloff, the Bloomberg Global Aggregate Index, which measures global bond performance, is still up 6.7% so far this year, though on Tuesday the index posted its biggest one-day drop since June 6.

Political Turmoil in Japan Intensifies Bond Market Pressure

In Japan, local factors have further added to the selling pressure in the bond market. In addition to following the global trend, investors are also worried about domestic political uncertainty. Previously, a key ally of Japanese Prime Minister Shigeru Ishiba said he would resign as LDP Secretary-General if the Prime Minister approved. This move increased political uncertainty.

Moreover, the market is cautious ahead of Thursday’s upcoming auction of Japanese 30-year government bonds, which is creating selling pressure on ultra-long bonds. Rajeev De Mello, global macro portfolio manager at Gama Asset Management, said:

“As a bond investor, I am maintaining an underweight duration position in Japan and avoiding longer-duration bonds globally. I’m very cautious about this 30-year bond auction, as both global and local factors are pushing yields higher.”

On Wednesday, Japan’s 30-year government bond yield rose to as high as 3.28%, a new record. Meanwhile, the 20-year bond yield reached 2.69%, the highest since 1999.

USD/JPY rose 0.13% to 148.52 yen.

Steepening Pressure on U.S. Yield Curve Continues

In the U.S., the shape of the Treasury yield curve is becoming a market focus. Analysts believe that steepening pressure on the curve (i.e., long-term yields rising faster than short-term yields) will persist. Kenneth Crompton, a strategist at National Australia Bank, said:

“The pressure for yield curve steepening will remain persistent, as a range of factors are constantly increasing the risk premium on the U.S. curve.”

The market is closely watching the upcoming U.S. employment data on Friday. Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, commented:

“We might see more steepening pressure on the U.S. yield curve, especially if the nonfarm payroll data on Friday is weak and the market starts to price in more near-term Fed rate cuts. The UK and Japan may also face similar pressures.”

The U.S. 30-year Treasury yield has returned near the 5% mark.

Tariff Disputes and Global Market Dynamics

On a geopolitical and macroeconomic level, global traders are struggling with a complex set of factors, including key economic data, U.S. tariff policy, the independence of the Federal Reserve, and the global fiscal outlook. Bessent will begin interviews for the Federal Reserve Chair position on Friday.

Meanwhile, U.S. President Trump said his government would ask the Supreme Court for a quick ruling, hoping to overturn a previous federal court decision that declared several of his tariffs illegally imposed. In Australia, second-quarter economic growth accelerated, reinforcing the case for the central bank to keep rates unchanged this month, resulting in lower bond prices. Together, these factors suggest that global stock markets are at a crossroads.

Risk Warning and DisclaimerThe market involves risk and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account individual users’ special investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this is at your own risk. ```