03/09/2026

BIZ & FINANCE THURSDAY | SEPT 3, 2026

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Bond selloff deepens on inflation risks, oil fears

Ueda declined to comment when asked about markets near fully pricing in the chance of a rate hike at the September policy meeting. On the rise in JGB yields, Ueda said it was largely driven by global upward pressures on yields but stressed that the BOJ will stay vigilant to market developments. The BOJ raised interest rates to a 31-year high of 1% in June on the view Japan was on the cusp of durably hitting its 2% inflation target. It kept rates steady in July but signalled a strong chance of a near-term hike on mounting price pressures from the Middle East war and a weak yen. Bessent’s repeated calls for higher BOJ rates and a slew of hawkish communications from the central bank have led markets to near fully price in the chance of a rate hike this month. – Reuters Taiwan firms plan another US$20b US investment TAIPEI: Taiwanese companies are planning another US$20 billion (RM81 billion) of investments in the US driven by demand for AI applications, the island’s economy minister said yesterday without giving details, though drawing a warm response from a visiting US official. The US, which is Chinese-claimed Taiwan’s most important international backer and arms supplier despite the lack of formal diplomatic ties, has pushed Taiwanese technology companies to ramp up their investments as part of a US effort to get more domestic semiconductor manufacturing. Speaking at the opening of the US pavilion at the SEMICON trade show in Taipei, Taiwan Economy Minister Kung Ming-hsin said Taiwanese companies were “very actively” investing in the US. Since May, when Taiwan attended the SelectUSA Investment Summit, Kung said the ministry had conducted a new assessment of which companies, aside from major chipmaker TSMC, might want to further their investments in the country, and the result was an extra US$20 billion. AI and chip orders were “extremely lively”, which is what is drawing this interest, Kung added, though he did not give details of which companies he was talking about. TSMC announced in July a further US$100 billion investment in the US state of Arizona, bringing the total planned investment to US$265 billion. Speaking at the same event as Kung, a US Commerce Department official who oversees the government programme to boost domestic semiconductor manufacturing, called the CHIPS Act, welcomed the announcement. “It demonstrates our continued shared commitment to a secure, resilient and innovative semiconductor and electronics supply chain,“ said Bill Frauenhofer, executive director of semiconductor investment and innovation at the department. “These projects will strengthen critical technology capabilities in the US and advance innovations that will shape our collective future for decades to come.” US President Donald Trump has on occasion criticised Taiwan for “stealing” American semiconductor business, a perception Taiwan’s government says is unfair even as it has backed its companies to increase their US investments. – Reuters

SINGAPORE: Global bonds sold off sharply yesterday, extending a rout that is raising borrowing costs to multi-decade highs as the Middle East conflict pushes up energy prices, playing into investor fears about inflation and ballooning government debt. Sovereign yields are a reference point for asset prices across financial markets and the higher price of money means higher mortgage rates for consumers and tough choices for government spending as funding costs climb. The yield on 10-year US Treasury notes rose to a near three-year high of 4.81%, and a further climb towards 5% is likely to unsettle already jittery stock markets. Japan’s 10-year yield was perched above 3%, a 30-year high. Australia’s 10-year government bond yields rose to 5.198%, their highest level in over 15 years. Germany’s bund futures slipped 0.35% to their lowest since 2011, while French OAT futures fell 0.37% to a record low. Charu Chanana, chief investment strategist at Saxo, said bond investors are increasingly demanding a higher premium for inflation, fiscal risks and the sheer amount of debt coming to market. “That means the selloff can overshoot, with 5% on the US 10-year looking increasingly plausible before yields become sufficiently attractive to bring buyers back,” Chanana said. A spree of bond sales from big tech companies aggressively raising money to fund the AI boom has added pressure on the sovereign bond market. Naka Matsuzawa, chief macro strategist at Nomura Securities in Tokyo, said hyperscalers’ willingness to pay reasonably high rates was pulling up yields across the board, with the focus now on whether growth can rise along with them. “The (AI-driven) productivity leap needs to translate into higher wages,” he said. If that materialises, he said, then the economy can live with higher rates. Global bond routs have become increasingly common in the past few months as the energy shock due to the Middle East war rattles investor nerves about rising debt loads across major o Middle East conflict drives up energy costs and rattles financial markets

Rising government debt pushing investors to seek better returns for their money. – UNSPLASH PIX

“If the policy answer becomes some form of financial repression (like yield curve control or QE) that would likely be incredibly bullish for gold,” Ferres said. Investor focus has also been on what the Federal Reserve may do to contend with inflation that has remained above the central bank’s 2% target, with hawkish comments from Fed Chair Kevin Warsh last week leading traders to ramp up rate-hike bets. Energy cost pressures continue to dog policymakers. Brent crude futures rose 1% to US$95.61 per barrel yesterday, after gaining nearly 6% in the previous session. The 2-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose to 4.41%, its highest level since January 2025. Traders have priced in a rate hike in Europe next week and about a 68% chance of a US rate hike the week after that. The scale of the structural shift in markets is highlighted by the rise in Japanese government bond yields, once the lowest in the world, to lift the 10-year rate above 3% for the first time in 30 years on Tuesday. It was last at 3.01% yesterday. “Rising JGB yields not only reflect investor concerns over Japan’s fiscal outlook, with ambitious spending plans signalled for the coming years, but also global pressure on long term funding costs,” said Fred Neumann, chief Asia economist at HSBC. – Reuters

economies and inflation risks. These pressures have raised the spectre of “bond vigilantes,” a reference to debt investors who seek to impose fiscal discipline on governments they perceive as profligate by demanding higher compensation to hold their bonds. “The fear is that the Bond Vigilantes are on the loose and driving yields higher in protest over large government deficits, mounting government debt, and rapidly rising government interest costs,” said Ed Yardeni, president of Yardeni Research. “We share the Bond Vigilantes’ concerns, but we aren’t convinced bond yields are, or will soon be, prohibitively high,” said Yardeni, who coined the term Bond Vigilantes in the 1980s. “If it (US 10-year yield) hits 5%, we expect strong demand for the bond, including from Treasury Secretary Scott Bessent. He’ll issue more Treasury bills to buy back bonds if necessary to avert a selling panic,” Yardeni said. The US Treasury stepped into markets last month to cap a rise in long-end bond yields, although the impact of the move was short-lived with the yield on 30-year Treasuries back near its highest in 19 years. Nick Ferres, CIO of Vantage Point Asset Management in Singapore, said rates have reached a level where they will start to pressure public and private sector debt service, with higher yields also weighing on valuations, particularly in long-duration growth sectors. “Having said that, we will set policy mindful of upside risks to inflation,“ he told a news conference after attending the G20 finance leaders’ gathering in Asheville, North Carolina. In a separate speech in northern Japan, hawkish BOJ board member Hajime Takata said the BOJ should raise rates nimbly in response to inflationary pressures, rather than at a fixed semiannual pace, to forestall risks of an inflation overshoot. The hawkish comments helped lift the yield on the two-year Japanese government bonds (JGB), which is most sensitive to monetary policy, to 1.83% yesterday, the highest since 1995. In the news briefing, Ueda confirmed the meeting with Bessent on Sunday but did not comment on what was discussed. The comments are Ueda’s last opportunity to speak publicly on policy and economic

BOJ chief signals chance of September rate hike, debate on price risks ASHEVILLE: The Bank of Japan (BOJ) will debate raising interest rates including in September with a focus on whether inflationary risks were heightening, its governor Kazuo Ueda said on Tuesday, signalling a strong chance of a hike this month. far, so we need to carefully assess the cumulative impact on the economy,“ Ueda said. conditions before a blackout period ahead of the upcoming policy meeting on Sept 17-18. Global inflation and a subsequent selloff in bond markets were among key topics of debate at the G20 finance leaders’ gathering with Japan’s 10-year bond yield hitting 3% for the first time since 1996. prices are moving in line with our baseline scenario, as well as risks,“ Ueda said. “We will debate these factors thoroughly, including at our next policy meeting.”

The remarks came in the wake of a statement by the US Treasury Department saying Treasury Secretary Scott Bessent met Ueda and called for “decisive” monetary steps to combat the weak yen – cementing the case for a Japanese rate hike this month. While he refrained from pre-committing to a September hike, Ueda said he hoped to discuss with the board this month whether the likelihood of the BOJ’s economic scenario materialising was heightening and whether upside price risks were increasing – both prerequisites for further rate increases. “We hope to continue raising interest rates as financial conditions remain accommodative. On the other hand, we’ve raised rates five times so

Ueda said recent data suggests that economic and price conditions were moving roughly in line with its projections in a quarterly outlook report in July, adding that the BOJ’s basic approach on monetary policy remained unchanged. With underlying inflation quite close to the BOJ’s 2% target, however, the BOJ must pay particular attention to inflationary risks in guiding policy, Ueda said. Among key factors to scrutinise were upside price risks from the Middle East conflict, robust AI-related demand and the boost to inflation from a weak yen, he said. “We will scrutinise whether the economy and