Asian equities were mixed in early Tuesday trade as investors weighed elevated global bond yields and overnight Wall Street gains.
"Investors remain wary of calling a top in yields after a steady march higher from mid-August as the U.S. economy expands amid booming [artificial-intelligence] infrastructure spending," said Ryan Felsman at the Commonwealth Bank of Australia. Elevated inflation also sustains the prospect of further Federal Reserve rate hikes, he added.
The yield on the 10-year U.S. Treasury rose above 5.34% on Monday, marking a fresh 24-year high. It was last 0.21 basis points higher to above 5.30%, according to LSEG data.
While the U.S.'s September nonfarm payrolls report weakened the case for an October Fed rate hike, softer employment data may not provide sustained relief for the U.S. Treasury market, said MUFG's Lloyd Chan.
Japan's 10-year yield added 2.5 basis points to 3.116%, New Zealand's 10-year yield rose 4.5 basis points to 5.120%, and Australia's expanded 9.2 basis points to 5.406%, LSEG data showed.
Bond yields and equity prices typically move inversely to one another, partly because rising yields can drag on corporate profits by hiking borrowing costs. However, the bond sell-off hasn't dampened exuberance surrounding strong earnings expectations and the AI boom in equities markets, leading yields and stocks in the U.S. to advance in tandem.
Wall Street's gains spilled over into some Asia-Pacific markets, with Japan's Nikkei Stock Average up 0.3%, Hong Kong's Hang Seng Index rising 1.0% and Australia's S&P/ASX 200 adding 0.55%. However, South Korea's Kospi was down 0.4%.
Global equity positioning continues to suggest a selective and uneven appetite for equity risk, with Asia appearing the weakest for positioning overall, Citi analysts said in a note.
In particular, a large proportion of Nikkei Stock Average short positioning seems vulnerable to forced covering if policy expectations turn more accommodative, they said. Investors remain bearish overall, but some could be forced to buy back their short positions if markets rise, Citi said.
In the commodity markets, oil rose slightly, with front-month Brent futures holding above the psychologically-important $100-a-barrel level.
The rise in Middle Eastern exports, lower Chinese imports and non-OPEC+ oil supply growth should point to oversupplied conditions in crude oil markets, Commonwealth Bank of Australia's Vivek Dhar said.
Still, the market's hesitation to price in oversupply seems justifiable, as it likely considers the current upswing in Middle East exports to be unsustainable, he added.
Front-month Brent crude-oil futures was up 0.1% at $100.44 a barrel, and front-month West Texas Intermediate futures gained 0.1% to $89.48 a barrel.
Gold was also muted, with spot prices down 0.2% to $4,131.19 an ounce. Elevated bond yields typically increase the opportunity cost of holding the non-interest-bearing precious metal.