GLOBAL MARKETS-Asian stocks bounce off 2-month low as bonds, China markets steady

* Asian shares off 2-month low, China rebounds
* Steadier bonds ease investor anxiety
* Market still wary of bond yields ahead of auctions

By Hideyuki Sano and Matt Scuffham
TOKYO/NEW YORK, March 10 (Reuters) - Asian stocks bounced
back from a two-month low on Wednesday after bond yields eased
following a well-received auction and as Chinese shares found a
footing after recent steep falls on policy tightening worries.
MSCI's ex-Japan Asia-Pacific shares index .MIAPJ0000PUS
rose 0.4%, a day after it hit a two-month low. The CSI300 index
of mainland China's A-shares .CSI300 rose 0.7% in early trade.
The rebound came after Chinese shares had fallen to their
lowest levels since mid-December the previous day on the
prospect of tighter policy and a slowing economic recovery.
Japan's Nikkei .N225 was little changed while e-mini
futures for the S&P 500 EScv1 shed 0.25%, erasing earlier
gains.
"Markets are giving full attention to bonds. As earnings are
not growing that fast right now, the lofty stock prices we have
now will become unsustainable if bond yields rise further and
undermine their valuation," said Hiroshi Watanabe, senior
economist at Sony Financial Holdings.
The yield on benchmark 10-year notes US10YT=RR slipped to
1.539%, having peaked at 1.626% on Friday, after Tuesday's
auction of $58 billion in U.S. 3-year notes was well received.
Yet, many market investors remained on edge, with the next
tests of investor appetite for government debt due later this
week in the form of 10-year and 30-year auctions.
"Although the bond market has steadied a bit, pressures will
remain," said Naokazu Koshimizu, senior rates strategist at
Nomura Securities.
"It has priced in future normalisation of the Fed's monetary
policy, the Fed's policy becoming eventually neutral. But it has
not yet priced in the chance of its policy becoming tighter."
Some investors see a real risk of an overheated U.S. economy
and higher inflation on the back of planned spending by the
Biden administration, including a $1.9 trillion stimulus and an
even bigger initiative on infrastructure.
On Wall Street, each of the major averages closed higher,
led by a gain of nearly 4% in the Nasdaq, giving the tech-heavy
index its best day since Nov. 4.
The index has been highly susceptible to climbing rates, and
Monday's retreat left it down more than 10% from its Feb. 12
close, confirming what is widely considered to be a correction.
"Today the 10-year is down a bit, and that takes pressure
off valuations, so tech is performing well. The market is just
about getting comfortable at this level of rates," said Kristina
Hooper, chief global market strategist at Invesco in New York.
The speedier rollout of COVID-19 vaccines in some countries
and the planned U.S. stimulus package helped underpin a brighter
global economic outlook, the Organisation for Economic
Cooperation and Development said, as it raised its 2021 growth
forecast. In foreign exchange markets, the dollar index =USD backed
away from a 3-1/2-month high of 92.506 to stand at 92.138.
The euro firmed to $1.1881 EUR= , off Tuesday's 3 1/2-month
low of $1.18355 while the yen changed hands at 108.76 per dollar
JPY= , above a nine-month low of 109.235 set the previous day.
The offshore Chinese yuan CNH= strengthened to 6.5235 per
dollar from Tuesday's three-month low of 6.5625.
Oil prices backed off on easing concerns over a supply
disruption in Saudi Arabia.
U.S. crude futures CLc1 slipped 0.3% to $63.72 per barrel,
away from a near 2 1/2-year high of $67.98 touched on Monday.
Brent crude futures LCOc1 settled at $67.52 per barrel,
down 72 cents or 1.06%.

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