Oil Price Surge Sparks Global Bond Rout and Rate Hike Fears

Global bond yields spiked to new highs on Friday as surging oil prices fueled inflation risks and investors scrambled to price in more policy tightening from central banks. Brent crude climbed to a four-month high of US$109.97 a barrel, capping a weekly gain of nearly 13 per cent.

The surge in oil prices has raised the stakes for US consumer prices data due later this day, which could make or break the case for a Fed rate hike next week. Analysts at JPMorgan now expect eight of the nine developed-market central banks to hike interest rates by the year end, including the Federal Reserve.

Higher bond yields raised the discount rates used for corporate valuations, leaving Asian stocks in deep losses. MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.8 per cent while Japan's Nikkei tumbled 2.8 per cent.