The Morning Edge

Asian Markets Recover as Bond Yields Retreat From Multi-year Highs

Here’s your quick read to start the day: a chatty, no-fuss look at overnight moves, the big story, what’s on the docket, and the tickers you need to watch.

The US Department of the Treasury

US Treasury Secretary Scott Bessent

By Nandinee Keluskar

Nandinee Keluskar is an independent financial journalist.

August 20, 2026 at 2:26 AM IST

Global Mood: Cautiously Risk-on
Drivers: Iran-US Standoff Deepens, US Treasury buyback

Asian markets shifted back towards risk-on Thursday, tracking a Wall Street rebound as US Treasury yields eased from multi-year highs. South Korea’s Kospi surged 4.41%, Japan’s Nikkei gained 1.21% and Australia’s ASX 200 rose 0.29%. The retreat in longer-dated Treasury yields improved equity valuations, particularly for rate-sensitive technology stocks, after US authorities announced measures to ease pressure in the bond market. However, the recovery remained tempered by persistent geopolitical risks.

The US-Iran standoff showed little progress, with Tehran maintaining the closure of the Strait of Hormuz and Washington signalling tougher sanctions. Brent crude held above $91 a barrel, keeping energy-driven inflation risks elevated. Renewed violence in Gaza and intensified Russian missile strikes on Kyiv added to the broader geopolitical uncertainty. For now, the fall in bond yields and renewed appetite for technology stocks are supporting risk sentiment, but elevated oil prices and unresolved conflicts remain key risks to the rally.

THE BIG STORY
The US Treasury on Wednesday said it would double the size of buybacks for 10- to 30-year government debt securities to at least $4 billion per operation, providing a temporary relief from a weeks-long rise in yields that had unsettled global investors. The increase from the previously planned $2 billion buybacks will apply to securities in the 10-year to 20-year and 20-year to 30-year segments. The change will be take effect from September 9 till November 4, the US Treasury department said.

The announcement followed a sharp bond selloff on Tuesday that pushed the 30-year Treasury yield to its highest level since 2007. Investors were concerned about a possible escalation in the US-Israeli war with Iran and a worsening US fiscal outlook as total public debt approached $40 trillion.

The US-Iran standoff showed no sign of resolution Wednesday as Trump maintained there were no talks planned while Iran insisted Hormuz remained shut pending US concessions, with ship crossings still in single digits and Brent holding just above $91. The UAE suspended all trade and financial transactions with Iran after reporting two Iranian ballistic missiles launched toward maritime traffic, the first such incident since May, and a vessel was struck by an unknown projectile transiting the strait. Internally, three Iranian officials told Reuters the leadership is privately worried that further economic punishment could reignite domestic unrest and erode the Islamic Republic's legitimacy, even as it publicly projects resolve. A US administration official warned there were "many levers the president can crank harder in the weeks and months ahead," signalling a deepening sanctions campaign ahead of Bessent's promised unprecedented economic isolation measures.

Data Spotlight
Fed minutes from the July meeting showed policymakers divided on inflation risks, with several officials questioning whether financial conditions were sufficiently restrictive and a small group favouring an immediate rate hike to avoid larger increases later. Officials broadly viewed inflation risks as tilted to the upside, though the minutes predate subsequent data showing cooler employment and inflation, suggesting markets may be overestimating current tightening expectations.

The US Treasury announced it would at least double long-dated bond buyback operations covering maturities of 10 to 30 years, after 30-year yields climbed to their highest since 2007. Following the announcement, the 30-year yield fell as much as 9 basis points to 5.19%, signalling the Treasury's readiness to intervene if borrowing costs rise too sharply or liquidity deteriorates.

The 30-year fixed mortgage rate held at 6.77%, with total mortgage applications slipping 0.4%. Purchase applications fell 2% as affordability pressures and economic uncertainty prompted buyers to delay, while refinancing applications rose 2% but remained subdued.

Takeaway: The Treasury's intervention in long-dated bond markets underscores growing concern about borrowing cost levels, even as Fed minutes signal lingering hawkish sentiment that predates the recent run of softer inflation and jobs data. With mortgage rates near one-year highs and housing demand persistently weak, the stakes around the Fed's next policy decision are rising.

WHAT HAPPENED OVERNIGHT

US stock futures steady as markets digest tech selloff and await Fed minutes and retail earnings

Futures were little changed with Dow flat, S&P 500 flat, and Nasdaq 100 down 0.22% as investors assessed Tuesday's tech-driven selloff and ongoing West Asia uncertainty.
Brent crude futures rose 1.1% to a three-week high as Trump and Iran continued to make conflicting claims over Strait of Hormuz control, keeping supply uncertainty elevated.
The 30-year Treasury yield held near 5.28%, close to its highest since 2007, as multi-decade highs in global bond yields raised borrowing costs and complicated the policy outlook.
Chip stocks remained under pressure with Marvell and Intel each losing over 1% in premarket, extending Tuesday's Philadelphia Semiconductor Index decline of 5%.
Estee Lauder jumped 6.8% after forecasting annual profit above estimates on strong China demand, a rare bright spot amid the broader cautious tone.
FOMC minutes from the July meeting are due later in the day, with a more hawkish internal debate potentially keeping rate expectations elevated, though contained inflation limits how far long yields can rise before triggering a broader risk asset repricing.
Markets still price at least one 25bps Fed hike by year-end, though September odds have dropped significantly following last week's tame inflation data.

US Treasury yields pull back from 20-month highs as Treasury doubles buyback limit on long-dated securities

The 10-year yield fell to 4.65% from Tuesday's 4.75% peak after the Treasury doubled its long-dated buyback operation limit to $4 billion, signalling active intervention to limit duration exposure.
The move complemented a joint US-Japan FX intervention to support the yen by selling euros, while Bessent called for the Fed to expand its FIMA facility beyond $60 billion to allow Japan to access dollar liquidity without selling Treasuries.
The August bond selloff was driven by surging AI-debt issuance, higher deficit spending, and elevated inflation risks lifting term premia estimates, with the 30-year yield hitting its highest since 2007.
FOMC minutes confirmed some members see the case for higher rates, keeping the tightening risk premium in longer-dated yields intact despite Wednesday's pullback.

Dollar falls below 99 to lowest since late May as Treasury doubles long-term buyback program

The dollar index dropped below 99 after the Treasury signalled willingness to actively intervene in bond markets to cap long-term yields, raising the outlook for dollar liquidity from the Treasury General Account.
The move complemented earlier US-Japan joint FX intervention that drove the dollar sharply lower, while Bessent called for higher FIMA facility limits to allow foreign countries to access dollar liquidity without active FX market intervention.
FOMC minutes confirmed some members see the case for higher rates, though the Treasury's intervention signals tempered the dollar's safe-haven appeal from a hawkish Fed narrative.

Oil settles at near four-week high as UAE cuts financial ties with Iran and Hormuz traffic slows

Brent settled at $91.62/bbl, up 0.7%, and WTI at $85.83, up 1.1%, both at their highest since July 24, as the UAE suspended all financial and economic transactions with Iran following recent missile attacks.
Only six commodity vessels crossed Hormuz on Tuesday, down from nine the prior day and below the 10-day average of 11, as Trump insisted the strait was open while Iran maintained it remained shut.
The temporary ceasefire expired Monday with no renewal, and Iran is reportedly eyeing military targets in Europe if Trump escalates, adding a new dimension to the conflict's geographic reach.
Russian oil exports from western ports fell 15% below loading plans in the first half of August due to Novorossiysk disruptions, adding further tightness to global supply.
US crude inventories rose 4.4 million barrels to 428.8 million barrels last week, easing some near-term supply concerns, while US refinery utilisation rose to 97.2%.
Analysts noted Brent moving above $91 signals a higher risk premium is being priced in, with potential for a return to three-digit levels if tensions persist.

Day’s Ledger*

Economic Data

German July PPI
US August Philadelphia Fed Manufacturing Index
US Initial Jobless Claims

Corporate Actions

Earnings: Manipal Health Enterprises

Policy

ECB Monetary Policy Meeting Minutes

Tickers to Watch

HEXAWARE TECHNOLOGIES: States no reliable evidence of systems or customer environment breach, following non-mainstream media reports of a threat actor alleging possible employee data exposure.
ADITYA INFOTECH: Board approves proposal to raise up to 15 billion rupees via equity shares, potentially through public issue, QIP or a combination, subject to shareholder and regulatory approvals.
HDFC LIFE INSURANCE COMPANY: Receives IRDAI approval for reappointment of Vibha Padalkar as MD & CEO for five years, effective September 12, 2026.
HYUNDAI MOTOR INDIA: To raise vehicle prices by up to 1% across portfolio effective September 2026, citing rising input/commodity costs and macroeconomic uncertainty.
KOLTE-PATIL DEVELOPERS: Appoints Hrishikesh Parandekar as CEO, effective August 24, 2026.
FEDBANK FINANCIAL SERVICES: Federal Bank subsidiary to consider raising up to 25 billion rupees via debt instruments, including NCDs, at board meeting on August 25, 2026.
DR LAL PATHLABS: Dubai-based subsidiary Dr Lal PathLabs FZCO incorporates new entity Dr Lal PathLabs Indomed LLC in Tashkent, Uzbekistan, on August 19, 2026, subscribing to 70% of its share capital.
EMS: Emerges as L1 bidder for water treatment plant and related works in Kota, Rajasthan, for Rajasthan's Public Health Engineering Department, valued at 1.9086 billion rupees (incl. GST).
RAMCO SYSTEMS: US arm Ramco Systems Corporation selected by Pem-Air to drive AI-based digital transformation of engine MRO operations, deploying Ramco Aviation Software across GE90, Trent 700 and CFM LEAP platforms.

Must Read

(*Compiled from various media sources)

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