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Gold hits record high on fiscal concerns as long bond yields increase

On Wednesday, the global decline in long-dated bond prices extended into Asia. Meanwhile, gold reached a new high as worries about government debt and economic expansion grew.

After overnight gains in gilts and Treasuries with similar maturities, the 30-year Japanese government bonds (JGBs) yield reached an unprecedented 3,255%. Japan's Nikkei index of shares opened lower following Wall Street declines after data showed continued contractions in U.S. Manufacturing.

The data from the European services sector will provide an indication of how the countries are coping with the unpredictable tariff regime imposed by U.S. president Donald Trump. On Friday, the Federal Reserve will release key U.S. labor data that could indicate a rate cut.

Skye Masters of National Australia Bank's markets research said on a podcast that the rise in bond rates is affecting your U.S. tech sector. It's all about the government's budget deficit and its implications for bond issuance.

Trump said on Tuesday that his administration would ask the Supreme Court to expedite a ruling on tariffs, which an appeals court ruled illegal last week. The court allowed tariffs to remain in place until October 14,

Data released on Tuesday showed that U.S. manufacturers contracted for the sixth consecutive month in August, as they struggled to cope with import tariffs. The euro zone and Britain's purchasing managers indexes are scheduled to be released on Wednesday.

The U.S. nonfarm employment figures on Friday will include data on private payrolls and job openings. This information will provide clarity on the labour markets that have become the focal point of the Fed's policy debate.

The Fed is widely expected to cut interest rates in the next few weeks. Markets are pricing in a 89% chance that they will do so.

Bond yields are inversely related to bond prices. In recent years, investors have become increasingly concerned with the debt levels in many countries, from Japan to America.

As markets prepare for the sale of debt on Thursday, the 30-year JGB's yield has risen 8 basis points to a new record of 3.28%.

The yield of the benchmark 10-year Treasury note in the United States rose by 0.4 basis points, to 4,281%. The 30-year Treasury yield rose 0.7 basis point to 4.978%. This is the highest it has been since mid-July.

The broadest MSCI index of Asia-Pacific stocks outside Japan rose 0.1% while Japan's Nikkei fell 0.5%.

After the release of second-quarter Gross Domestic Product data, Australia's S&P/ASX 200 Index fell 0.9%.

The dollar's winning streak continued, with a 0.3% increase to 148.79 Japanese yen. The dollar index (which tracks the greenback versus a basket currencies) was flat at 98.431 following a 0.7% rise on Tuesday.

Sterling is currently trading at $1.33716, down 0.2% on the day. The pound fell by 1.1% during the previous session, and 30-year gilt rates reached their highest level since 1998. This was after the British government issued 10-year bonds at the highest rate in 17 years.

In Europe, French Premier Francois Bayrou is likely to lose his confidence vote after opposition parties protested against the cuts he made to government spending. Meanwhile, British Finance Minister Rachel Reeves will raise taxes to meet her fiscal targets in her Autumn Budget.

U.S. crude oil ticked upwards by 0.2%, to $65.69 per barrel. Gold spot reached $3,546.99 - a new record.

Futures indicated a strong opening in Europe. The Euro Stoxx 50 futures rose 0.6% across the region, while German DAX futures gained 0.5%, and FTSE futures gained 0.3%.

The S&P 500 E-minis (U.S. Stock Futures) were up by 0.1% to 6,430.5.

(source: Reuters)