Global Markets Wrap: Treasury Rally, Tech Slump, and Asia’s Resilient Export Outlook

US Treasury bonds rallied and the dollar softened, while tech stocks declined, driven by a robust 30-year Treasury auction, new visa restrictions from the Trump administration, and a report on lower-than-expected revenues for OpenAI. Specifically, yields fell across the US Treasury curve as the 30-year bond auction saw solid demand, achieving a bid-to-cover ratio of 2.54—above the previous six-auction average of 2.41. Indirect bids, which include foreign investors, captured 72% of the supply, up from 69%. Looking ahead, the stabilization of Treasury yields will depend on factors such as the US-Iran conflict and oil price trends. Although Trump stated that the US would not attack Iran before the midterm elections following “productive discussions,” this remains contingent on whether and when Iran chooses to escalate the conflict.

Meanwhile, tech and semiconductor stocks fell as the Trump administration announced plans to target the Permanent Labour Certification Program (PERM), which facilitates the sponsorship of foreign workers on H-1B and other visas for US permanent residency. This policy shift could impact countries like India and its IT sector, given the historical reliance on H-1B visas for US IT outsourcing, though this dependency has generally decreased over time. Additionally, a Financial Times report indicated that OpenAI’s annualized revenue is roughly US$20 billion lower than previously signaled, contributing to the recent decline in semiconductor stock sentiment.

Overall, Asia’s macroeconomic outlook remains resilient, with Taiwan’s September exports surging 61% year-on-year, and South Korea’s current account balance showing robust strength at approximately 20% of GDP annualized. While our base case anticipates some modest deceleration in exports, elevated activity levels suggest that the AI investment cycle is poised to extend well into 2027 and beyond.

Ahead of today’s EU-China trade negotiations, the People’s Bank of China (PBOC) released a formal statement rejecting claims that the Chinese Yuan (CNY) is undervalued, asserting that China has no intention of seeking competitive advantages through currency devaluation. The central bank argued that exchange rate adjustments cannot resolve global structural imbalances, countered the IMF’s assessment of the CNY’s valuation, and announced plans to begin reporting certain foreign exchange operational data to the IMF starting in 2027 to enhance transparency. Looking forward, whether the EU implements key trade safeguard measures proposed in a joint paper by Germany and France will be critical. Ultimately, exchange rates reflect underlying fundamentals; the broader global challenge remains structural imbalances, characterized by discrepancies between savings and domestic demand, diverging competitiveness, and significant public fiscal deficits, particularly in developed economies.

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