Asia open: Fragile Friday

Asian markets are bracing for a fragile Friday, with high and climbing bond yields chomping at the heels of risk assets, rising AI costs, and gloomy forward outlooks pumping the brakes on the mega-cap Big Tech rally. After the S&P and Nasdaq logged their sharpest one-day losses in two months, don’t count on Wall Street sending over any positive vibes.

The not-so-affectionately dubbed “bond vigilantes” are back in action, flexing their muscles and driving yields higher across the developed markets.These hawkish bond enforcers aren’t just making waves; they’re sending a clear, no-nonsense message to what they view as spend-happy governments: fiscal discipline is overdue. With steely resolve, they’re calling the shots, reminding policymakers that the days of freewheeling spending may be on borrowed time.

For Asian markets, all eyes are glued to U.S. bonds, where the countdown to the U.S. presidential election has dialled up the tension. Bond market signals are flashing amber—if not outright red. Implied volatility and the elusive “term premium” have shot to their highest levels in a year. It’s a take-no-prisoners seismic setup, with every tick and tremor in U.S. yields rippling straight across the Pacific.