Shares, bonds rally as markets await signals for Fed rates

Asian markets witnessed a relief rally on Thursday as investors braced for hints from the US Federal Reserve and central bankers about potential policy tightening. Japanese government bond yields fell from record highs, mirroring a recovery in US Treasuries overnight, ahead of a Tokyo auction of super-long debt. Oil prices dipped from high levels due to uncertainty surrounding possible military strikes between the US and Iran.

The market's primary attention is now on Friday's US payrolls report, following disappointing private labor data for August. Fed board governor Christopher Waller is scheduled to speak after New York Federal Reserve President John Williams signaled cautious expectations for a rate increase this month. Analyst Gavin Friend believes a resolution to the Iran-U.S. conflict could boost yields globally, potentially easing global tensions and allowing central banks to consider normal policy considerations.

The MSCI Asia-Pacific index outside Japan rose 0.5%, outperforming US stocks, while the dollar index declined slightly. US Treasury yields softened from record levels, with the 10-year note yield dropping to 4.784%, and the 30-year JGB yield falling to 4.065%. Despite rising geopolitical tensions, investors remained cautious, particularly over Middle East developments and the upcoming US economic data.