Oil prices and central bank expectations continue to drive global bond yields higher

Asia Market Update: Oil prices and central bank expectations continue to drive global bond yields higher; Multi-year highs seen for AU, JP, German and French yields amid Bessent comments; RBNZ expected to hike on Wed, G20 and Aussie Q2 GDP also eyed.

General trend and developments

-Japan MOF pays up, but sees stronger demand at 10-year JGB auction. 10-year JGB yields had already risen toward 3.00% before the bond auction; US Treasury Sec Bessent was said to have told Japan officials rate hikes are needed [in Japan], according to NHK. Recall, Bessent was said to have previously commented on Japan multiple times back in 2025. In Aug of last year, Bessent noted Japan needs get their inflation problem under control. He added there was ‘leakage’ from Japan.

-Incidentally, Japan and US rate hike expectations remain in focus, especially after Jackson Hole and ahead of the next BOJ rate decision [Sept 18th]. Following Warsh’s comments, BoJ rate-hike probabilities rose higher, with September BoJ OIS at 1.2050% (90.0% chance of a 25 bp hike, up from 84.5% on Friday), October at 1.2550% (110.0% chance, up from 107.5% on Friday), and December at 1.4013% (168.5% chance, up from 162.5% on Friday).

-On the sidelines of the G20, US Treasury Secretary Scott Bessent and Japanese Finance Minister Katayama held constructive talks, confirming that orderly FX and yen rates are crucial for global market stability. Japan’s [Top FX Diplomat Mimura & Unamed MOF Senior] officials noted misappropriated comments from Bessent reported earlier on by the Japanese NHK, later adding on that discussions were productive and led to further FX cooperation, while Bessent also respects BoJ independence.

-On the military front, Iran appears quiet, thus far on Tuesday. Ships were, even, reported to have crossed the Strait of Hormuz on Monday, despite yesterday’s skirmish between the US and Iran. Commodity vessels transiting via Strait of Hormuz remained 'little changed' in single digits [vs. 5/day over the weekend of the August 28-30th, 2026], according to shipping data. Earlier on Monday, US President Trump confirmed new Iran strikes will be ‘limited’.

-Asian macro data recap: PMIs were overall mixed. China Aug RatingDog Mfg beat ests. New orders placed with Chinese manufacturers rose for the fifteenth consecutive month in August, the longest period of growth since 2018, according to analysts cited in the data. Consumer goods were also cited, despite disappointing retail sales figures seen out of China in recent months. Philippines PMI data was one of the positive standouts, as the manufacturing figure rose to the highest level since 2016. Supporting factors included new orders which were helped by ‘model launches’. That being said, it remains to be seen whether the upturn is sustainable, especially as the country’s central bank (BSP) has been raising rates. In summary, the PMI readings across Asia’s manufacturing sector showed broad-based expansion in August, with Japan (54.9 final), South Korea (52.3), Australia (52.0 final), Taiwan (54.7), Thailand (53.8), Philippines (54.9) and Malaysia (50.2) all remaining above the 50.0 threshold signaling growth. Indonesia (49.8), however, fell back into contraction territory, with it being driven by a renewed, albeit modest, decline in output and employment.

-Meanwhile, strong Japan Q2 Capex data suggest upward revision to GDP figures; South Korea’s exports continued to rocket higher during Aug [Chip exports +209% y/y; Exports to China +119.3% y/y; Exports to the US +89.3% y/y; Exports to the US and China were supported by chips, computers and general machinery; Auto exports -29.8% y/y]; AUD/NZD traders in focus for Wed amid Aussie GDP data and RBNZ decision.

-Further in the session, South Korea’s Budget Minister announced at a Cabinet Meeting that the 2027 budget would total KRW821T (vs. KRW728T in 2026), a +12.8% y/y increase. The government plans to allocate KRW162.3T to a future response fund, propose KRW3.4T for nuclear submarines and strategic weapons, and set aside KRW2.6T in a special budget for chips. Additionally, South Korea aims to reduce the national debt-to-GDP ratio to 48.3% (vs. 51.6% prior), whilst cutting government bond issuance in September versus August levels, with total planned bond issuance of up to KRW222.8T in 2027.

-President Trump announced that nine additional pharmaceutical companies—including Beone, Sun Pharma, and CSL—have committed to most-favored-nation (MFN) pricing practices, bringing the total to 26 companies covering approximately 90% of the U.S. pharma market. Under the agreements, drug prices are expected to fall 50–80%, with price differences versus other countries previously reaching 400% to 600% levels. The administration is seeking congressional action to codify the deals. Separately, a TTN analysis identifies elevated LOE risk across several major pharmaceutical companies, with the greatest vulnerability concentrated in companies where a high percentage of revenue and EPS depends on drugs approaching loss of exclusivity.

-Asian equities trade cautiously and generally lower as traders ponder factors including the rise in global bond yields. Australia’s ASX 200 opened -0.5% lower at 9,033 as bond yields climbed, with the 10-year yield hitting its highest level since 2011. Fast-fashion retail giant Shein debuted on the Hong Kong Stock Exchange, opening flat at HK$48.56 which reportedly valued the company at HK$13.6 billion (US$1.7 billion). Earlier on, the Commerce Ministry stated targeted CNY60T in retail sales by 2030 and vowed to boost auto consumption.

-US equity FUTs -0.2% to -0.1% during Asia trading.

Looking ahead (Asian-weighted focus, using Asian time-zone)

-Mon Aug 31st: HK July Retail Sales, (Mon night, IN Q1 GDP, RBI Monetary and Credit Information Review, DE Prelim Aug CPI, US Aug Chicago PMI).

-Tue Sep 1st: Global S&P/HSBC Mnfg PMI, JP Q2 Capital Spending, KR Prelim Aug Trade Balance, AU Q2 Current Account & July Buiilding Approvals, CN Aug RatingDog Mnfg PMI, JP 10-Year JGB Auction, ID Aug Trade Balance & CPI, EU Prelim Aug CPI & Unemployment Rate, (Tue night, US Aug S&P/ISM Mnfg PMI, US July JOLTS).

-Wed Sep 2nd: KR Aug CPI, AU Q2 GDP & RBA Interest Rate Statement, NZ RBNZ Interest Rate Decision & Statement & Press Conference, (Wed night, US Aug ADP Nonfarm Employment Change, CA BoC Interest Rate Decision & Statement & Press Conference, RU July GDP & Retail Sales & Unemployment Rate).

-Thu Sep 3rd: Global S&P/HSBC Svcs PMI, AU July Trade Balance, CN Aug RatingDog Svcs PMI, VN Aug CPI & Retail Sales & Industrial Production & Trade Balance, JP 30-Year JGB Auction, MY Interest Rate Decision, EU July PPI, (Thu night, US July Trade Balance & Q2 Nonfarm Productivity & Q2 Unit Labor Costs, CA July Trade Balance & Q2 Labor Productivity, US Aug S&P/ISM Svcs/Composite PMI).

-Fri Sep 4th: KR/TW/HK/PH Aug FX Reserves - USD, JP July Household Spending, PH Aug CPI, SG July Retail Sales, EU July Retail Sales, (Fri night, US Aug Average Hourly Earnings & Nonfarm Payrolls & Unemployment Rate).

Holidays in Asia this week

-Mon Aug 31st: Malaysia, Philippines, Vietnam.

-Tue Sep 1st: Vietnam.

-Wed Sep 2nd: Vietnam.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens -0.5% at 9,033.

-(AU) Australia Q2 Current Account Balance (A$): -27.2B v -30.0Be.

-(AU) Australia July Building Approvals M/M: -3.6% v -5.0%e.

-(AU) Australia Aug Final Manufacturing PMI: 52.0 v 52.0 prelim (confirms 5th month of expansion).

-(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 74.9 v 77.5 prior.

-(AU) Australia 10-year bond yield rises to the highest since 2011; US 30-year bond enters Sept on the worst stretch since 2006 - US financial press.

-(AU) According to AMP, housing prices in Australia could decline by 10% - US financial press.

-(AU) Australia has started shale gas output to support data center 'boom' - US financial press.

-(AU) Australia raised wheat crop forecast amid higher export demand - Press.

-(AU) Australia sells A$300M v A$300M indicated in 4.75% Jun 2054 Bonds: Avg Yield: 5.6657% v 5.3040% prior; bid-to-cover: 3.68x v 2.46x prior.

-(AU) CSL.AU Comments: Sees no material financial impact in FY27 from US pact.

-(NZ) NZ Herald Op-Ed by Conor English: As a former RBNZ adviser, there’s hints interest rate increases are not fully working, suggests the RBNZ should 'ponder' how OCR hike might actually increase prices [ahead of RBNZ rate decision on Wed (Sept 2nd)] - Press [update].

China/Hong Kong

-(CN) Shanghai Composite opens -0.2% at 3,979; (HK) Hang Seng opens -0.6% at 25,416.

-(CN) CHINA AUG RATINGDOG MANUFACTURING PMI: 51.5 V 51.0E (10th month of expansion).

-(CN) China Foreign Ministry Spokesman Guo: Country has never sought a trade surplus [EU market close].

-(CN) China Commerce Ministry (MOFCOM): To target CNY60T retail sales by 2030; Vows to expand automobile consumption [EU market close]

-(CN) Huawei, Xiaomi, Honor raise smartphone prices - Caillian.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY359B in 1-day Overnight Reverse Repos.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY5B in 7-day Reverse Repos; Net drains CNY469B v drains CNY221B prior.

-(CN) China PBOC sets the yuan mid-point at 6.7809 v 6.7828 prior.

-(HK) Macau Aug Casino Rev (MOP): 21.9B, -1.2% y/y.

-(HK) 0625.HK *DEBUTS ON THE HONG KONG STOCK EXCHANGE (HKEX); SHARES DEBUT AT HK$48.56/SHARE OF $6.19/SHARE (V HK$48.56/SHARE OR $6.19/SHARE PRIOR).

-(HK) 9888.HK Announces dual-primary listing on Hong Kong stock exchange, effective today [August 31st, 2026].

Japan

-(JP) Nikkei 225 opens -0.6% at 65,885.

-(JP) JAPAN Q2 CAPITAL SPENDING (CAPEX) Y/Y: +1.6% V -0.3%E.

-(JP) JAPAN SELLS ¥2.6T VS. ¥2.6T INDICATED IN 10-YEAR JGB BONDS; AVG YIELD: 2.9950% V 2.8400% PRIOR; BID-TO-COVER: 3.29X V 2.56X PRIOR.

-(JP) Japan Aug Consumer Confidence: 35.5 v 35.3e.

-(JP) Japan Aug Final Manufacturing PMI: 54.9 v 55.1 prelim (confirms 7th month of expansion).

-(JP) Japan plan to spend ¥616B to extend fuel-price relief - NHK [update].

-(JP) Japanese Fin Min Katayama: Held bilateral meeting with US Treasury Secretary Bessent: Confirmed with Bessent that orderly FX rates crucial for stability of global financial markets; Confirmed with Bessent that orderly yen rates crucial for stability of global financial markets.

-(JP) Japan's Top FX Diplomat Mimura: Finmin Katayama, US Bessent held good discussions on need for further cooperation on FX.

-(JP) Japan Economy Minister Kiuchi: Can't say details of next FY27 budget as of now.

-(JP) Japan MOF Senior Official: Bessent understands BoJ's independence; Believe BoJ will guide monetary policy that best suits economy, rather than based on what US tells it to do.

-(JP) US bond market replaces spending caps as check on Japan budget - Nikkei [update].

-(JP) 6758.JP Sony Group's semiconductor division to collaborate with Saudi Aramco to develop an AI model for plant maintenance operations - Nikkei.

Korea

-(KR) Kospi opens -0.5% at 6,784.

-(KR) South Korea Budget Minister: 2027 budget KRW821T [vs. KRW728T in 2026], +12.8% y/y - Cabinet Meeting.

-(KR) South Korea Aug Trade Balance: $34.7B v $30.1Be.

-(KR) South Korea Aug Manufacturing PMI: 52.3 v 53.1 prior (9th month of expansion).

-(KR) South Korea President Lee: Interest rate rise is unavoidable; Fiscal policy should play role amid rising interest rates - Cabinet Meeting.

-(KR) South Korea's Presidential Policy Chief Kim [backed single-stock leveraged ETFs] announces resignation - Yonhap.

-(KR) South Korea said to 'skip' US-led Pacific Vanguard warship deployment; cites typhoon - Donga.

-(KR) South Korea Finance Ministry sells KRW2.5T vs. KRW2.5T indicated in 30-year government bonds at Avg Yield: 4.630% v 4.505% prior.

-(KR) 005380.KR Follow-up: [Confirms] South Korean Labor Union approves tentative wage agreement - Korean press.

Other Asia

-(IN) India announces details of upcoming bond sale (held on Fri); to sell combined INR320B in 2031 and 2066 bonds on Sept 4th.

-(IN) India Aug Final Manufacturing PMI: 52.8 v 52.9 prelim (confirm 62nd month of expansion).

-(ID) Indonesia Aug CPI M/M: 0.2% v 0.2%e; Y/Y: 3.2% v 3.1%e.

-(ID) Indonesia Parliament approves Destry Damayanti as Central Bank Governor.

-(ID) Indonesia July Trade Balance: +$130M v -$0.0Be.

-(ID) Indonesia Central Bank Gov Damayanti: We will continue good policies.

-(TW) Taiwan sells NT$25B vs. NT$25B indicated in 5-year Bonds; Avg Yield: 1.820% v 1.317% prior; bid-to-cover: 1.57x v 1.81x prior.

-(TW) Taiwan Aug Manufacturing PMI: 54.7 v 55.1 prior (9th month of expansion).

-(ID) Indonesia Aug Manufacturing PMI: 49.8 v 50.2 prior (moves back into contraction).

-(PH) Philippines Aug Manufacturing PMI: 54.9 v 51.8 prior (4th month of expansion).

-(MY) Malaysia Aug Manufacturing PMI: 50.2 v 50.7 prior (3rd month of expansion).

-(TH) Thailand Aug Manufacturing PMI: 53.8 v 54.2 prior (16th month of expansion).

-(TH) Thailand Central Bank sells THB60B vs. THB60B indicated in 3-month bills; Avg Yield: 0.94619% v 0.95206% prior; bid-to-cover: 1.65x v 1.01x prior.

North America

-(US) US Pres Trump: Announces MFN-related company commitments; Nine new pharmaceutical companies are committing to low prices, including Beone, Sun Pharma, and CSL; 90% of the pharma market, or 26 companies, have committed to MFN practices; Needs Congress to codify pharmaceutical agreements [US market close].

-(US) Trump will meet on Tuesday with US refiners and fuel distributors to discuss expanding refining capacity and lowering gasoline prices – CNBC [US market close].

-(US) AUG DALLAS FED MANUFACTURING ACTIVITY: 11.6 V 1.6E [US market close].

-(US) Treasury Sec Bessent: Oil prices will come down: Operation Economic Outcast will create the conditions to make Tehran want to come to the table [US market close].

-(US) President Trump to meet with oil, gas retailers, refineries at 1:30pm ET on Tuesday [1st September, 2026] [US market close].

-(US) US VP Vance: We want to have a positive relationship with China; We also recognize China is a competitor - Fox News.

-(US) Treasury Sec Bessent tells Japan officials rate hikes are needed - NHK.

-(US) Treasury Sec Bessent told Russian Finance Minister Siluanov that the US will not provide Russia economic relief until the Ukraine war ends - Source familiar with the bilateral meeting.

-(US) Wall Street banks push law firms to cut fees due to AI - FT.

-(US) Army Sec Dan Driscoll resigns after months friction with Defense Secretary Hegseth - WSJ.

-(US) SEC presses firms to prove access to shares in startups - WSJ.

-(US) Pres. Trump: Comments on the state of US film industry; Proposes bipartisan support for a Federal Production Incentive - Truth Social.

-(US) NVDA Expands MediaTek collaboration, invests $3.5B in convertible bonds; MediaTek will adopt NVIDIA NVLink Fusion to support custom XPU development for NVIDIA NVLink-connected, rack-scale AI factories. [US market close].

-(US) ANTHROPIC.IPO Signs $35B cloud deal 'backed' by Nvidia [refers to the agreement with Lambda in Texas] - WSJ.

-(US) BA Announces agreement to resume contract talks with the Engineers Union (SPEEA) on September 8th, 2026.

-(BR) KAR.AU Brazil extends 12% temporary tax on crude oil exports for 60 days.

-(VE) US White House issues Fact Sheet on Venezuela oil agreement.

Europe

-(RU) Russia's Putin and China's Xi discussed Ukraine at the SCO meeting but it was not the main theme of their discussion - Kremlin statement [EU market close].

-(UR) Ukraine Officials: Russia attacks border infrastructure in Ukraine's Izmail area, border crossing to Romania suspended.

-(RU) Russia Local Governor: Fire broke out in port area of Russia's UST-Luga.

-(ES) Spain Jun Current Account Balance: €2.4B v €1.8B prior [EU market close].

-(DE) Germany Aug CPI North Rhine Westphalia M/M: 0.2% v 0.9% prior; Y/Y:2.9 % v 2.7% prior [EU market close].

-(FR) Fitch affirmed France's sovereign rating at A+; Outlook stable [EU market close].

-(FR) France Aug New Car Registrations: +7.4% y/y; France Tesla Aug New Car Registrations: +278.51% y/y.

-(UK) Financial Stability Board (FSB) Bailey: Warns of threat to stability posed by new AI models [EU market close].

-(UK) Aug BRC Shop Price Index Y/Y: 1.5% v 0.9% prior [2-year high].

-(EU) ECB's Rehn (Finland): "Conflict of attrition" in Iran could keep inflation high - FT.

-(SE) Sweden Central Bank (Riksbank) Dep Gov Jansson: Inflation risks being elevated but have scope to wait and see [EU market close].

-(NL) Netherlands Aug Preliminary CPI Y/Y: 3.3% v 3.3%e.

-(NL) Netherlands Aug Manufacturing PMI: 53.8 v 54.4 prior (14th month of expansion).

-(IE) Ireland Aug Manufacturing PMI: 55.4 v 55.1 prior (20th month of expansion).

Middle East

-(IR) US Pres Trump: Confirms that new Iran strikes will be limited; Claims an average of 30 ships a night escorted out of the Strait of Hormuz; Has ruled out ever using a nuclear weapon against Iran [US market close].

-(IR) Treasury Sec Bessent: Iran is lashing out kinetically because they are losing economically [US market close].

-(IR) Iranian Foreign Min Araghchi: US must return to MoU to exit this situation [US market close].

-(IR) UKMTO: Has received a report of an incident 17 nautical miles east of Khasab in Oman.

-(IR) Commodity vessels transiting via Strait of Hormuz remain 'little changed' in single digits [vs. 5/day over the weekend of the August 28-30th, 2026] - US financial press.

Levels as of 01:20 ET

Nikkei 225 -0.1%; ASX 200 -0.3%; Hang Seng -1.3%; Shanghai Composite flat; Kospi -0.1%.

Equity S&P500 Futures -0.1%; Nasdaq100 -0.2%; DAX -0.4%; FTSE100 -0.6%.

EUR 1.1625-1.1603; JPY 159.90-159.64; AUD 0.7181-0.7164; NZD 0.5929-0.5906.

Gold -0.5% at $4,427/oz; BTC +1.0% at $78,860; WTI Crude Oil +1.4% at $86.92/bbl; Copper +0.3% at $6.7113/lbs.