Asian markets news: Treasury yields hit new decade highs in Asia on Tuesday as traders grew wary of how long interest rates might need to stay elevated, with the higher risk-free rate putting a dampener on stocks even as beaten-down Chinese markets attempted a rebound.

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Benchmark 10-year US Treasury yields rose about 2.5 basis points (bps) in early Tokyo trade to 4.366 per cent, extending an overnight rise to hit their highest since 2007.

Yields go up when bond prices go down. US Ten-year yields are up almost 40 bps for the month so far. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.4 per cent, led by volatile gains in China.

Japan's Nikkei (.N225) rose 0.5 per cent, helped by an overnight drop in the yen, which can be a boon for exporters' profits and a positive lead from Wall Street where the S&P 500 rose 0.7 per cent.

S&P 500 futures fell about 0.2 per cent in early trade.

The selloff in bond markets is catching investors' eyes since it has no obvious trigger and has not come with major shifts in inflation expectations, meaning that "real" yields, which discount inflation expectations, have surged.

"That being the case, it is not outlandish to expect a significant impact on credit and capital flows," said Vishnu Varathan, head of economics at Mizuho Bank in Singapore, since it ought to prompt investors to reevaluate taking risks.

A near 300 bps added to 10-year US real yields since September 2021 is the most acute tightening of real rates in 25 years, he said, with a speech on Friday by Federal Reserve Chair Jerome Powell capable of driving them higher still.

"Powell's comments on policy could continue to underpin, if not boost, real UST yields, especially if the notion of higher neutral rates are raised alongside reiteration on 'higher for longer'," Varathan added.

The 10-year real rate breached 2 per cent in overnight trade.

Sovereign yields in Australia, Korea, New Zealand and Japan all rose on Tuesday, with 10-year Japanese yields hitting their highest since 2014 at 0.66 per cent.

CHINA REBOUND BUMPY

Elsewhere in Asia, the Hang Seng in Hong Kong was trying its best to snap a seven-day losing streak as economic data out of China has turned from bad to worse and authorities have yet to offer more than vague promises of support.

However, early gains of around 1 per cent proved hard to hang on to and the Hang Seng was volatile and up 0.5 per cent by mid-morning.

Shares in giant Australian miner BHP Group (BHP.AX) fell 1.3 per cent after it posted its weakest annual profit in three years - though it said it expected Chinese demand to stabilise and growth momentum to pick up again later in the year.

China disappointed markets with smaller-than-expected interest rate cuts on Monday, though it has been resolute in defending its sliding currency.

With the yuan close to testing global financial-crisis lows, state banks have been selling dollars in the spot market and, sources told Reuters, in the offshore forwards market. The currency was steady at 7.2826 per dollar on Tuesday.

The Japanese yen was also on intervention watch, having slipped further past levels that prompted authorities to step in last year. The yen traded steady at 146.1 per dollar.

The euro, which rose slightly overnight, was firm at $1.0906, while the Antipodean currencies, were pinned near nine-month lows and looking vulnerable.

Oil has been stepping down from August peaks and Brent crude futures were last at $84.42.

Overnight European gas prices jumped as strikes loomed at Australian liquefied natural gas facilities. Benchmark Dutch gas is up nearly 50 per cent for August.

The data calendar is fairly bare on Tuesday, but investors are already positioning for good news when chip designer Nvidia (NVDA.O) reports on Wednesday, driving the stock up 8.5 per cent overnight.