Bonds tremble as inflation hits new records

Bonds tremble as inflation hits new records

Two-year German bund yields hit their highest in over a decade as investors sold out. Benchmark 10-year Treasury yields rose 10 basis points (bps) and were up a further 2.5 bps to 2.8749% early in the Asia session.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1% and Japan's Nikkei rose 0.5%.

S&P 500 futures bounced 0.5% after the index slid 0.6% on Tuesday. The U.S. dollar, meanwhile, has steadied after sliding in the second half of May and it rose slightly against the euro and the yen in early trade on Wednesday.

The U.S. Federal Reserve begins shrinking assets holdings built up during the pandemic on Wednesday and traders expect it will raise rates by 50 bps at meetings this month and next.

"Markets are pricing in rate hikes in June from the UK, U.S., Sweden, Australia and Canada," said Societe Generale analyst Kit Juckes.

"The more the markets focus on the inflation data and central bank action, the more likely it is that we have a bumpy start to the summer in risk sentiment and a strong one for the dollar."

The Bank of Canada is expected to raise its benchmark target rate 50 bps to 1.5% when it meets later in the