Volkswacht Bodensee - Asian markets extend rally as traders assess US Treasuries pledge

Treasury Secretary Scott Bessent's pledge that he had more tools to provide support did little to comfort US markets as sceptical Wall Street investors resumed their selling amid concerns over elevated inflation and government borrowing, among other things.

The lack of progress on reopening the Strait of Hormuz added to unease on trading floors, with oil prices gradually rising over the past two weeks as the United States and Iran remain deadlocked.

The US Treasury provided a much-needed boost to markets on Wednesday when it said it planned to "at least double" its sovereign bond buybacks, a day after the 30-year yield surged to levels last seen in 2007 just before the global financial crisis.

That sent long-term rates plunging but they rebounded on Thursday, with Mark Malek, of Muriel Siebert & Co, calling it "a housekeeping move destined to be short-term, at best".

Bessent told CNBC on Thursday that his department had a "big toolkit" to address a rise in yields that it views as unmoored to financial conditions. Such measures could include increased bond purchases beyond the scale announced the day before.

"We think that this is a thinly traded area of the market, that we're in August, and there's been a lot of corporate issuance that's influenced the market," Bessent said.

"We believe that the yields don't reflect the underlying fundamentals."

He added that inflation -- which has been running above the Federal Reserve's two percent target for more than five years -- would ease once the United States gets "on the other side" of the Iran war and oil prices retreat.

The increase in yields weighed on Wall Street, where all three main indexes fell as tech firms -- which rely on debt to fund their huge investments -- dropped.

However, Asia fared better, with tech-rich Seoul helped by a rally in chipmakers Samsung and SK hynix, with the former said to be planning a shareholder return worth as much as $79 billion.

SK hynix rocketed more than 12 percent Thursday after announcing a $29 billion share buyback.

Hong Kong, Singapore, Wellington and Taipei also rose, though Tokyo, Sydney and Shanghai dipped.

On currency markets, the yen rose against the dollar after Japanese inflation picked up last month on higher oil prices caused by the Middle East crisis, giving the country's central bank room to hike interest rates next month.

Observers have said the spike in yields is down to a number of things.

Michael Hewson at MCH Market Insights wrote: "We already knew at the start of this year that governments would be looking to raise a lot of money due to increased spending commitments on both sides of the Atlantic, which would mean that buyers would likely be spoiled for choice.

"With the boom in AI infrastructure spending, we've discovered yet another source of supply in the form of corporate bonds with the likes of Amazon, Alphabet, Meta and the like looking to raise up to $500 billion of their own.

"This excess in supply is also likely an additional factor serving to weigh on global sovereign debt markets with some investors preferring to invest in Big Tech as opposed to indebted sovereigns."

Others pointed to Fed Chair Kevin Warsh's refusal to provide markets with forward guidance on the bank's plans as fuelling uncertainty on trading floors.

Traders will be closely watching his speech at next week's annual meeting of central bankers, economists and finance chiefs in Jackson Hole, hoping for some clarification on monetary policy.

- Key figures at around 0200 GMT -

Tokyo - Nikkei 225: DOWN 0.7 percent at 65,746.88 (break)

Hong Kong - Hang Seng Index: UP 0.7 percent at 25,882.03

Shanghai - Composite: DOWN 0.1 percent at 3,891.45

Dollar/yen: UP at 158.97 yen from 159.11 yen on Thursday

Euro/dollar: UP at $1.1690 from $1.1680

Pound/dollar: UP at $1.3644 from $1.3630

Euro/pound: DOWN at 85.67 pence from 85.68 pence

West Texas Intermediate: FLAT at $87.83 per barrel

Brent North Sea Crude: UP 0.1 percent at $93.89 per barrel

J.Sauter--VB