Bond Sell-Off Drives Yields Higher Across Asia

A global bond sell-off has driven yields higher across Asian markets, hitting housing markets particularly hard. The selling accelerated on expectations that elevated oil prices and the ongoing U.S.-Iran conflict will keep inflation elevated.

In Japan, the benchmark 10-year government bond yield climbed above 3.1% for the first time in months, reflecting growing conviction that the Bank of Japan will continue raising rates. The central bank hiked its policy rate to 1.25% earlier this month, and traders now price in additional increases before year-end.

Rising borrowing costs have begun to bite in Japan's property market. Average asking prices for existing condominiums in central Tokyo declined for the fourth straight month through August, according to industry data.

The Federal Reserve's rate hike under Chairman Warsh in recent weeks signaled that U.S. monetary policy will remain restrictive for longer than markets had expected. That decision reverberated through global fixed-income markets, lifting yields from Seoul to Sydney.