Asian Stocks Fall as Surging Bond Yields Overshadow U.S.-China Trade Truce

Asian stock markets broadly declined on Friday, pressured by a global bond market selloff that drove U.S. Treasury yields to their highest levels in nearly two decades. A temporary extension of the U.S.-China trade truce following a high-level summit provided little support for investor sentiment.

Bond Rout Pressures Equities

A sharp selloff in government bonds was the primary driver of market weakness, significantly increasing borrowing costs and weighing on risk assets. The benchmark U.S. 10-year Treasury yield reached a 19-year high of 5.2251% in the previous session, while the 30-year yield touched 5.5016%, its highest level since 2004.

This trend was mirrored in other developed markets, with the 10-year Japanese government bond yield climbing to 3.115%, a peak not seen since 1996. Persistently high oil prices have fueled concerns about stubborn inflation, increasing expectations for further monetary tightening. According to futures markets, traders are now pricing in a 70% probability of another interest rate hike by the U.S. Federal Reserve in October, up from 53% earlier in the week.

Regional Market Performance

Most major regional indexes ended the session in negative territory, with trading volumes thinned by market holidays in mainland China, South Korea, and Taiwan.

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• Hong Kong's Hang Seng Index fell nearly 2%, with its tech sub-index dropping over 2.5%.
• Australia's S&P/ASX 200 declined by 0.5%.
• Singapore's Straits Times Index edged down 0.2%.

Japan's market was a notable exception. The Nikkei 225 rose 1.3% as a weaker yen benefited exporters and technology shares continued to recover following a holiday break.

U.S.-China Summit Offers Limited Relief

Investors also digested the results of a Thursday meeting between U.S. President Donald Trump and Chinese President Xi Jinping. The leaders agreed to extend their existing trade truce by two months, according to U.S. Treasury Secretary Scott Bessent, giving negotiators more time to address contentious issues like tariffs and technology restrictions.

While the extension prevents an immediate escalation, the outcome failed to resolve fundamental strategic differences between the two economic powers. The lack of a breakthrough left investors focused on whether the temporary truce can lead to a more durable long-term agreement.