Equity benchmarks for Japan, Australia and China all fell while a decline in South Korean equities dragged the Kospi Index to a six-month low. Hong Kong’s Hang Seng Index also decreased, falling as much as 0.9%, its lowest level since late November.

A gauge of Chinese property developers dropped after slumping by the most in nine months on Monday amid fresh signs of turmoil for the sector. China Evergrande Group missed a debt payment and former executives were detained. That added to fears about the sector’s debt pile and compounded concern that global growth will stall as the economic engine of the world’s second biggest economy sputters.

Treasury yields continued to climb after the 10-year rate added 11 basis points to set a 16-year high on Monday to trade above 4.54%. The momentum flowed into Asia, with Australian and New Zealand yields also rising.

“Rates will stay high,” BlackRock Investment Institute analysts including Wei Li, global chief investment strategist, wrote in a note. Quantitative tightening and Treasury issuance in the US could spur yields higher in the near term. “Rising long-term bond yields show markets are adjusting to risks in the new regime of greater macro and market volatility.”

Increasing yields supported the greenback. The Bloomberg dollar index held its gains from Monday, when it closed at the highest level since December. The yen steadied after weakening to a year low after Bank of Japan officials doubled down on the message that stimulus is still needed.

A warning that a US government shutdown would reflect poorly on America’s credit rating from Moody’s Investors Service did little to shift market sentiment on Monday. Concerns about a shutdown may intensify later this week as Oct. 1 draws near. 

Crude prices edged down on Tuesday, falling for a second session. Traders are increasingly concerned that rising oil prices risk fanning inflation, which will make it difficult for policymakers to reduce rates anytime soon. Hedge funds boosted exposure to oil on bets tightening supplies will stoke demand. 

Federal Reserve Bank of Minneapolis president Neel Kashkari said he expects US interest rates to increase again this year given the robust economy. Those sentiments echoed comments last week from Boston Fed president Susan Collins, who said further tightening “is certainly not off the table,” while Fed Governor Michelle Bowman signaled that more than one increase will probably be required. 

Fed Bank of Chicago head Austan Goolsbee, meanwhile, said Monday it’s still possible for the US to avoid a recession. “I’ve been calling that the golden path and I think it’s possible, but there are a lot of risks and the path is long and winding,” he said in a CNBC interview.

“There are several reasons to believe that the full impact from tighter monetary policy is still yet to take effect,” said Henry Allen, a strategist with Deutsche Bank. “As such, it will be some months before we can sound the all clear for the economy, not least given longer-term interest rates are still reaching new highs even now.”