FISG Daily Market Wrap 20th August

Treasury Buybacks Lift Asian Markets as Geopolitical Risks Persist

Global markets turned more constructive after the US Treasury announced plans to at least double its purchases of longer-dated government debt, helping ease pressure on long-term yields and supporting risk appetite. The 30-year Treasury yield fell to around 5.18%, while the 10-year yield slipped to 4.63%. The move also weighed on the Dollar, which remained near a three-month low. Asian equities rallied sharply, led by South Korea’s Kospi, which jumped almost 6%. Samsung Electronics and SK Hynix surged, with the latter also benefiting from a major share buyback announcement. Japan’s Nikkei and Hong Kong’s Hang Seng also advanced as lower global yields improved the backdrop for equities. In China, the PBoC left its key lending rates unchanged, with the 1-year rate at 3.00% and the 5-year rate at 3.50%, both matching expectations. Meanwhile, Beijing announced corporate tax measures linked to anti-dumping actions on imported polyoxymethylene from the US, EU, Taiwan and Japan. Geopolitical risks remain elevated. Russia launched overnight strikes on Kyiv and surrounding areas, while Romania reported a drone crash on its territory during the Russian attack. The continued escalation adds another layer of uncertainty for European markets and risk sentiment. In the Middle East, shipping activity through the Strait of Hormuz has shown little improvement, highlighting the continued deadlock between the US and Iran. Oil remains supported by the lack of progress toward a resolution, with Brent recently trading around $93 a barrel. Gold remains highly sensitive to the combination of falling yields, a softer Dollar and geopolitical uncertainty. Bitcoin also extended its recovery above $69,000, supported by renewed optimism around US crypto legislation.