Bonds decline in Asia after slide in Treasuries

Japanese and Australian stocks fell. Futures for Hong Kong pointed to a muted start and those for the US stocks were little changed. China is in the midst of a week-long holiday.

Energy and financial stocks sold off Monday, erasing gains for the year in the S&P/Toronto Stock Exchange Composite Index. The tech-heavy Nasdaq 100 defied the negative sentiment, ending the day 0.8 percent higher, buoyed by firms including Microsoft Corp., Apple Inc. and Nvidia Corp.

The selloff in global bonds gathered momentum as the US shutdown reprieve prompted traders to raise bets on a November rate hike from the Fed to a roughly one-in-three chance, up from the 25 percent likelihood priced on Friday.

Fed Vice Chair for Supervision Michael Barr said the biggest question before central bankers was how long to leave rates elevated, while known FOMC hawk Michelle Bowman reiterated her call for multiple hikes. On Friday, New York Fed boss John Williams had suggested rates should stay high for some time.

The dollar gained against most of its Group-of-10 peers early Tuesday after Bloomberg’s dollar index jumped 0.7 percent Monday. The greenback touched a year-to-date high versus the yen after the Bank of Japan said it would conduct an additional buying operation.

Meanwhile, the Reserve Bank of Australia is forecast to leave its policy rate unchanged for a fourth meeting on Tuesday, even as Australian home prices stayed strong in September.

“The RBA board has been on hold over the last three meetings, showing a balanced approach to its achievement of the inflation target after the ‘risk management’ hikes in May and June,” strategists at JPMorgan Chase & Co. including Ben Jarman wrote in a note. “We have viewed the balanced approach as reasonable, but still see scope for one more hike,” which is likely to come in November, they said.

New Zealand’s central bank on Wednesday is also expected to keep rates unchanged 10 days from a general election.

The S&P 500’s intraday drop was seen as a bearish signal “given the fact that Congress came in and averted a risk that was on everyone’s radar as far as the government shutdown,” said Mike Harris, president of Quest Partners.

“The fact that we’re not seeing a more significant rally is meaningful, and once again this move up in interest rates in large part is the market finally waking up to this reality of higher rates for longer,” he said.

Elsewhere, gold prices slipped to seven-month lows, extending last week’s 4 percent slide, under pressure from surging bond yields. Oil retreated, with West Texas Intermediate dropping below $90 a barrel. A Citigroup Inc. analyst said waning demand from China is poised to to cap the gains from OPEC+ supply cuts.