Bond slump deepens in Asia after ECB chief foreasts faster inflation in eurozone

WELLINGTON (Bloomberg) - The global bond rout gathered pace in Asia, with Japanese notes slipping a fourth day after Mario Draghi forecast faster euro-area inflation and continued market volatility.

Yields on 10-year Japanese government bonds climbed 3 basis points to 0.49 per cent by 11:51 a.m. in Tokyo, the highest level since November, while Australian yields increased for a third day.

This year's gains in global bonds evaporated as the European Central Bank chief inflamed a selloff in German bunds, saying price growth in the region would pick up further.

"There's a huge selloff all over the world," said Kim Youngsung, the head of overseas investment at South Korea's Government Employees Pension Service in Seoul. "The European economy is back on track. The U.S. economy is stable. Suddenly we're worried about inflation."

The Bank of America Merrill Lynch Global Broad Market Index of notes with a total face value of US$41 trillion is now down 0.4 per cent for the year, after being up as much as 2.3 per cent in mid-April. Ten-year German bund yields have soared by 39 basis points this week, to 0.88 per cent, the highest level this year.

In Asia, rates on Australian government debt due in a decade jumped 10 basis points to 3 per cent. Yields on similar-maturity New Zealand and Singaporean notes climbed at least four basis points. Ten-year South Korean sovereign yields rose 2 basis points to 2.47 per cent.

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.