Yields jump, risk assets weaken in Asia on Fed's hawkish stance

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  • Regional stocks, FX weaken on hawkish Powell stance
  • Early inflation signs may be seen at year-end - Indonesia c.bank
  • Philippines Q4 GDP beats expectations
  • Taiwan's preliminary Q4 GDP expected after 0800 GMT

Jan 27 (Reuters) - Benchmark bond yields in several emerging Asian countries surged on Thursday, while stocks and currencies weakened, after the U.S. Federal Reserve signalled it could start hiking interest rates in March to tame inflationary risks.

Regional currencies were broadly weaker against a firmer U.S. dollar as the prospect of imminent rate hikes spooked investors of risk-sensitive assets.

Yields on India's benchmark 10-year bond hit a more than two-year high of 6.75%, while those in 10-year Malaysian bonds scaled a 32-month peak after U.S. Treasury yields firmed overnight.

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U.S. Fed Chairman Jerome Powell warned on Wednesday that inflation remained above the central bank's long-run goal and supply chain issues might be more persistent than previously thought. read more

"The sharp move in U.S. treasury yields is generally a headwind for Asian bond markets," said Mitul Kotecha, senior EM strategist at TD Securities.

"Higher U.S. yields usually bring less inflows to Asian bonds and effectively more liquidity tightening, which doesn't bode well with emerging market bonds as a whole."

Yields on Indonesia's historically high-yielding debt were up 3.6 basis points at 6.45%.

Analysts at Nomura said "Indonesian government bonds have been relatively well-behaved, especially after the reserve requirement ratio hike from Bank Indonesia last week." read more

Central banks in Asia have not been pressured to pursue interest rate hikes as aggressively as their peers in Europe and Latin America.

However, the prospect of higher U.S. interest rates have left regional policymakers balancing the need to protect economic recovery while stemming potential outflows that could weaken current account surpluses.

"With the somewhat hawkish signals by the Fed ... there may be greater pressure for central banks in the region to act on curbing inflationary pressures as well," Yeap Jun Rong, market strategist at IG said in a note.

Earlier this week, Singapore's central bank surprised markets by tightening its monetary policy settings, while Bank Indonesia's governor Perry Warjiyo has said that early signs of inflation may be seen at the end of this year. read more

Thailand's baht , India's rupee , South Korea's won and the Chinese yuan weakened between 0.4% and 0.8%.

Shares in Seoul (.KS11) fell 3.5% to their lowest level in nearly 14 months, while equities in Mumbai (.NSEI) and Shanghai (.SSEC) fell 1% and 1%, respectively.

Data from the Philippines showed that the country's economy expanded faster than expected in the fourth quarter of 2021. Shares (.PSI) were up 0.3%. read more

Separately, a Reuters Poll showed that Taiwan's gross domestic product, due to be released later in the day, is expected to have expanded at a slightly faster pace in the fourth quarter due to strong tech exports. read more

HIGHLIGHTS

** Indian shares (.NSEI) fall as much as 2.4%, while equities in China (.SSEC) hit their lowest since Aug. 20, 2021

** Thailand's baht marks worst session since Jan. 6

** China property shares slump as planned U.S. rate hike adds to woes read more

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Reporting by Harish Sridharan in Bengaluru; Editing by Sherry Jacob-Phillips

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