TOKYO/NEW YORK: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 rose 0.4%, a day after it hit a two-month low. The CSI300 index of mainland China’s A-shares 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 was little changed while e-mini futures for the S&P 500 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 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 backed away from a 3-1/2-month high of 92.506 to stand at 92.138.

The euro firmed to $1.1881, off Tuesday’s 3 1/2-month low of $1.18355 while the yen changed hands at 108.76 per dollar, above a nine-month low of 109.235 set the previous day.

The offshore Chinese yuan 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 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 settled at $67.52 per barrel, down 72 cents or 1.06%.