Asian markets extend rally as traders assess US Treasuries pledge

HONG KONG, Aug 21:Asian stocks edged higher on Friday as investors assessed the US Treasury's move to push down long-term bond yields, while analysts warned that alone would not be enough to keep borrowing costs from spiking.

Treasury Secretary Scott Bessent's pledge that he had more tools to provide support did little to comfort US markets as sceptical Wall Street investors resumed their selling amid concerns over elevated inflation and government borrowing, among other things.

The lack of progress on reopening the Strait of Hormuz added to unease on trading floors, with oil prices gradually rising over the past two weeks as the United States and Iran remain deadlocked.

The US Treasury provided a much-needed boost to markets on Wednesday when it said it planned to "at least double" its sovereign bond buybacks, a day after the 30-year yield surged to levels last seen in 2007 just before the global financial crisis.

That sent long-term rates plunging but they rebounded on Thursday, with Mark Malek, of Muriel Siebert and Co, calling it "a housekeeping move destined to be short-term, at best".

Bessent told CNBC on Thursday that his department had a "big toolkit" to address a rise in yields that it views as unmoored to financial conditions. Such measures could include increased bond purchases beyond the scale announced the day before.

"We think that this is a thinly traded area of the market, that we're in August, and there's been a lot of corporate issuance that's influenced the market," Bessent said.

"We believe that the yields don't reflect the underlying fundamentals."

He added that inflation -- which has been running above the Federal Reserve's two percent target for more than five years -- would ease once the United States gets "on the other side" of the Iran war and oil prices retreat.

The increase in yields weighed on Wall Street, where all three main indexes fell as tech firms -- which rely on debt to fund their huge investments -- dropped.

However, Asia fared better, with tech-rich Seoul helped by a rally in chipmakers Samsung and SK hynix, with the former said to be planning a shareholder return worth as much as $79 billion.�"AFP