By Chiranjivi Chakraborty and Andre Janse van Vuuren

(Bloomberg) — US Treasuries rose amid signs of investor demand returning for global bonds following a pullback that was driven by worries about elevated inflation and swelling government debt piles. The broad selloff in UK assets continued.

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Signs that this week’s rise in yields was enough to tempt some investors back into bonds came from strong demand at a 30-year Treasuries (^TYX) auction Wednesday and an equivalent sale in Japan Thursday. One gauge of demand at the auction of longer-dated Japanese debt was the highest since 2020.

“We see these rebounds in yields as a great opportunity to lock in income particularly for investors who are still sitting on too much cash, where we think yields can still fall further,” said Manpreet Gill, chief investment officer for Africa, Middle East and Europe at Standard Chartered, told Bloomberg TV.

The downturn in UK assets extended on Thursday as investors’ anxiety over the toxic mix of sticky inflation and sluggish growth deepened.

The pound (GBPUSD=X) fell 0.6% against the greenback to below $1.23 at a level last seen in October 2023. Ten-year gilt yields rose a further 2 basis points to 4.80% after hitting the highest level since 2008 on Wednesday. The FTSE 250 (^FTMC) fell for a third day.

Global stocks remained under pressure. US futures were slipping after Asian shares fell. Europe’s Stoxx 600 (^STOXX) was little changed.

Meanwhile, Beijing expanded its support for the beleaguered yuan with a plan to issue a record amount of bills in the Hong Kong market to add demand for the currency overseas.

“There was little deviation in China’s inflation data from what markets were expecting and hence, market reaction to it has been more limited thus far,” said Jun Rong Yeap, market strategist at IG Asia. “China’s consumer inflation remains subdued, which once again leaves deflation talk on the table and keeps market focusing on any upcoming consumption-driven stimulus.”

A gloomy outlook for China’s economy is adding pressure on Asian stocks as the latest inflation readings suggest that Beijing’s stimulus efforts have so far failed to revive demand. Next up is Friday’s US employment report, which may shed more light on the Federal Reserve’s policy outlook.

Japanese and Indian equities led weakness in Asia. Chinese shares on the mainland and in Hong Kong fluctuated, following data that showed deflationary pressures worsened in the world’s No. 2 economy.

The yen strengthened toward 158 per dollar. Japanese workers’ base salaries grew the most in 32 years, offering potential support for the central bank to raise rates this month.

US stock markets will be closed Thursday in observance of a national day of mourning for former President Jimmy Carter. The bond market will shut at 2 p.m. New York time.

US employers probably tempered their hiring last month to wrap up a year of moderating yet still-healthy job growth that economists expect to carry on in 2025. A survey conducted by 22V Research showed most investors are watching payrolls closer than normal. Only 26% of the respondents think Friday’s data will be “risk-on,” 40% said “risk-off,” and 34% “mixed/negligible.”

“We like US equities compared to the rest of the world” given that the growth outlook remains fairly benign, Dong Chen, chief Asia strategist at Pictet Wealth Management, said at a briefing Thursday. “Current valuation has to hold even though there is risk that if interest rates get much higher from current level that could pose a risk.”

Key events this week:

• Eurozone retail sales, Thursday

• US state funeral and national day of mourning for former President Jimmy Carter is a federal holiday, Thursday

• Japan household spending, leading index, Friday

• US jobs report, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:33 a.m. London time

• S&P 500 futures fell 0.3%

• Nasdaq 100 futures fell 0.5%

• Futures on the Dow Jones Industrial Average fell 0.2%

• The MSCI Asia Pacific Index fell 0.7%

• The MSCI Emerging Markets Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.2% to $1.0300

• The Japanese yen rose 0.1% to 158.12 per dollar

• The offshore yuan was little changed at 7.3570 per dollar

• The British pound fell 0.6% to $1.2287

Cryptocurrencies

• Bitcoin fell 1.7% to $92,817.25

• Ether fell 0.3% to $3,287.69

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.67%

• Germany’s 10-year yield was little changed at 2.55%

• Britain’s 10-year yield advanced three basis points to 4.82%

Commodities

• Brent crude was little changed

• Spot gold rose 0.1% to $2,665.23 an ounce

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Richard Henderson and Stephen Kirkland.

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