(Corrects typo in headline)
* Ten-year Treasury yields hit 1.3330%; yen hits 5-month low
* MSCI AxJ index eases from record high
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Global asset performance http://tmsnrt.rs/2yaDPgn
By Tom Westbrook and Pete Schroeder
SINGAPORE/WASHINGTON, Feb 17 (Reuters) - U.S. Treasury yields hit one-year highs on Wednesday, lending support to the dollar but pressuring lofty valuations for stocks, as investors reckoned that a stimulus-fuelled global recovery will eventually bring rising inflation.
Benchmark ten-year U.S. Treasury yields US10YT=RR rose as far as 1.3330% in Asia, the highest since February 2020, although they later eased back to 1.2989%. US/
The gap over two-year yields also opened to its widest in nearly three years, as traders figure that short-term monetary policy will stay accommodative, even as the world bounces back from the pandemic.
The prospect of better risk-free returns weighed on equities and MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was stalled just shy of Tuesday's record peak.
Japan's Nikkei .N225 fell 0.7% and S&P 500 futures ESc1 slipped 0.3% after the index posted a small fall overnight.
"You're basically taking away a deflation worry," said Rob Carnell, chief economist in Asia at ING.
"It's a general sense that things are moving back to normal, and probably the single biggest driver of that is the fall in COVID numbers in U.S., it's the re-opening that really delivers you the growth," he said.
New COVID-19 cases in the United States fell for a fifth consecutive week last week. bonds selloff, which was jump-started in January when Democrats won control of the U.S. Senate, has now added almost 40 basis points to U.S. 10-year yields this year as investors price in heavy government borrowing for stimulus spending.
Overnight on Wall Street, the Dow Jones .DJI was helped to a record closing high by gains from banks, which benefit from higher yields, while the S&P 500 .SPX fell 0.06% and the Nasdaq .IXIC dropped 0.3%. .N
Besides a cooling in stock-market exuberance, gold and the Japanese yen JPY= , have been other casualties of the rise in U.S. yields. Gold, which pays no income, tends to fall when yields rise and it touched a two-week low on Wednesday. GOL/
The yen is sensitive to U.S. rates because Japanese yields are anchored and higher U.S. returns can attract investment flows out of yen and into dollars. The yen hit a five-month low against the dollar on Wednesday and has lost 2.7% this year.
CHILL
A Texas cold snap that has shut down about a fifth of U.S. oil production has also stoked inflation expectations by boosting oil prices to 13-month highs. O/R
Front-month gas futures NGc1 also jumped as much as 10% to a more than three-month high, though a stronger U.S. dollar has since pared some of the rise.
U.S. crude futures CLc1 slipped 0.6% to $59.71 a barrel on Wednesday after poking above $60 on Tuesday, while Brent crude futures LCOc1 were also down 0.6% at $62.95.
In currency markets, the dollar's strength was applying broad pressure. The euro EUR=EBS dipped below its 20-day moving average to $1.2083.
The Australian and New Zealand dollars each slipped a fraction and the British pound, which has been surging as vaccinations roll out rapidly across the United Kingdom, was forced back below $1.39 and last sat at $1.3874. FRX/
Ahead on Wednesday investors will be eyeing inflation data releases in Britain and Canada for any signs of a jump. U.S. retail sales data is also due, as are newly published minutes from the Federal Reserve's January policy meeting.
"Tonight's release of the ... minutes is likely to reinforce the notion that the Fed is committed to keeping rates low for a longer period of time," Sophia Ng, an analyst at MUFG Bank at Singapore, said in a note to clients.
Earnings reports this week from Hilton Worldwide Holdings Inc HLT.N , Hyatt Hotels Corp H.N and Marriott International Inc MAR.O will also be scrutinized for signs of a pickup in global travel demand.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global assets
http://tmsnrt.rs/2jvdmXl Global currencies vs. dollar
http://tmsnrt.rs/2egbfVh Emerging markets
http://tmsnrt.rs/2ihRugV MSCI All Country World Index Market Cap
http://tmsnrt.rs/2EmTD6j
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>