The U.S. debt agreement boosts Asian stocks. Asian stocks rose on Tuesday as investors hoped the world’s largest economy would avoid a severe debt default.

After U.S. markets were closed on Monday for Memorial Day, MSCI’s broadest Asia-Pacific index outside Japan (.MIAPJ0000PUS) climbed 0.4% early Tuesday. The index is down 1.3% this month.
The Nikkei market index (.N225) fell 0.28% after hitting a 33-year high on optimism over the U.S. debt deal and a weaker yen, which benefits exporters. Australian shares (.AXJO) rose 0.03%.

China’s CSI300 Index fell 0.06%, while Hong Kong’s Hang Seng Index (.HSI) rose 0.31%.

On Tuesday, Asian bond traders cheered the deal to suspend Washington’s borrowing ceiling, sending longer-dated Treasuries higher.
Despite the optimism, many think markets are still in trouble.

“The U.S. had a poor resolution to the debt ceiling negotiations with still a huge increase in government debt and no real cuts to spending but has relieved pressure for now,” said Sydney broker Ord Minnett advisor James Rosenberg.

Bond markets and equities remain far apart. Moreover, the bond market suggests a 70% chance of a U.S. recession next year. These signs contradict the strong equity market.”

Spending caps and government program cuts are exchanged for a debt ceiling suspension until January 2025.

Due to narrow margins in the House and Senate, the bill needs moderates from both parties to pass.
Tokyo’s 10-year rates fell six basis points to 3.7596% at the outset. Thirty-year rates declined 5.5 bps to 3.9207%. S&P 500 e-minis rose 0.32% on Monday despite closing U.S. cash markets.

JB Were experts predicted $600 billion in bill issuance in six to eight weeks after Congress approves the debt accord.

How will bill issuance affect markets? “Some estimates suggest it could be the equivalent of one 25 basis points rate hike in financial conditions,” the investment firm’s analysts wrote on Tuesday.

On Tuesday, the dollar advanced 0.02% against the yen to 140.47, slightly below Monday’s year-high of 140.91.

The dollar index, which gauges the greenback against a basket of currencies of other key trading partners, fell to 104.23, just off a two-month high, while the euro rose 0.1% to $1.0714, having lost 2.78% in a month. It reached a six-month high against the Chinese yuan.

At $72.89, U.S. crude rose 0.3%. Brent dropped to $77.05. Gold fell to $1,942.39 per ounce.