Bond yields in the US and Japan are rising. Photo / NZ Herald
Rising international bond yields are spooking equity investors.
In Japan, bond yields are on the move after years of very low levels.
This week, yields on 30-year Japanese bonds peaked at 3.185% while 40-year notes hit 3.675%.
And in the world’s biggest debt market, fears over America’s fiscal position saw United States 10-year Treasuries trade at around 4.5% this week from 4% in early April.
Analysts said that concerns over US tariffs and world trade had tended to mask what’s been happening in the world’s major debt markets.
“While the tariff twists and turns driving the US market are exerting a morbid fascination on investors, the New Zealand and Australian markets have decoupled from them to some degree,” Salt Funds managing director Matt Goodson said.
“What has mattered more has been the extremely sharp sell-off in long bond yields in the US and Japan – both on fears of unsustainable fiscal positions."
When bond prices fall, yields rise.
Goodson said Moody’s downgrade of America’s credit rating and US President Donald Trump’s “big, beautiful bill” clearly showed a lack of willingness to deal with the reality of alarmingly high US debt levels.
“These high yields have filtered through to a moderate degree to New Zealand but haven’t had a noticeable impact on equities yet,” he said.
Craigs Investment Partners investment director Mark Lister said the rise in bond yields had given investors much to think about.
“You’re seeing increased risks of a [US] recession, and longer-term interest rates would normally come down in response to that, but they’re going the other way because of the concerns over the fiscal position and nervousness about the Government’s keenness to cut taxes,” he said.
“The higher those bond yields go, the more attractive they potentially become.
“A few more people are attracted to those sorts of assets, and that raises the opportunity cost for the equity market because of the higher yield you can get from a more conservative asset, the more you’ve got to get from the higher risk assets to compensate,” he said.
US 30-year Treasuries broke through 5% last week.
“That captured people’s attention, because it’s moving in the direction it shouldn’t be.
“Rising interest rates are headwind for equities and they’re causing investors to get a little bit cautious about why markets are moving the way that they’re moving.”
Lister noted Japanese yields were rising from “super low” levels.
“All these things are just throwing spanners into the works and the additional uncertainty is creating more volatility and nervousness.
“Everyone’s focused on tariffs but, in a way, that’s kind of noise.
“The real story is what is happening with US bond yields and the US fiscal position.”
When it comes to financial performance, Fisher and Paykel Healthcare has a habit of under-promising and over-delivering.
True to form, the respiratory products maker reported a 43% lift in its annual net profit to $377.2 million, on turnover of $2.02 billion (up 14%).
The profit for the March year was over the company’s own forecast range of $320m to $370m, and was ahead of market expectations.
Yet its outlook for the year ahead - operating revenue to be in a range of about $2.15b to $2.25b, and for its net profit to be about $390m to $440m - was disappointing for some, which led to a fall in its share price.
“The only blemish for us is growth rates fading - half on half - most notably in homecare consumables,” Jarden said in a note.
“We maintain our neutral rating, balancing a strong growth outlook with duration and track record of execution against limited valuation support at current pricing,” it said.
Key risks were the pace of clinical practice change, penetration of new geographies, and New Zealand dollar volatility.
Forsyth Barr senior analyst Matt Montgomerie said FPH’s 2026 revenue guidance of $2.15b to $2.25b was slightly soft relative to the broker’s expectations.
“Homecare was disappointing relative to our above consensus forecasts, but we still forecast above market growth in 2026,” he said.
A newlyrecapitalised Ryman Healthcare reported a $436.8m annual loss while total revenue rose 10% to $760.7m.
Nikko Asset Management equities analyst, Tim O’Loan, said the retirement village firm had met its guidance.
While a further $575m write down in the net tangible asset was guided to, he said the ultimate size of it was a surprise.
“Having seen this writedown, our expectation now is that these non-cash items in the financial statements should feature less going forward.
“And as the operating environment and sales cadence improve, and the new pricing structure gets bedded down, we would expect to see an improvement in the asset base.
He said Ryman was well-positioned to benefit from increasing demand on the aged care health service.
“As it comes out of a period of a significant financial and operational reset, the company now needs to move towards positive free cash flow and set in place the new growth strategy,” he said.
“If these last two critical steps are achieved, and provided the economic and operating backdrop are supportive, we expect Ryman to be well placed to repay investor patience.“
Salt Funds’ Goodson said New Zealand property stocks have staged a “stunning” rally of around 8% so far this month.
“After several tough years, they have finally reached a point where valuations have bottomed and even started to rise a touch.
“The discounts to net tangible assets (NTA) of many of the names had simply become too large now that NTA’s have stabilised,” Goodson said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.