SINGAPORE (Reuters) – Asian equities hit three week highs on Wednesday as cash fleeing tumbling bond markets flowed back toward big tech and other beaten-up sectors, while the Ukraine conflict’s potential to further hit supplies kept oil and commodity prices high.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%, with Hong Kong, Seoul and Sydney all registering similar sized gains.

The index is at its highest since March 4. Japan’s Nikkei jumped 2.5% to touch a two-month top and the moves follow a gain of 1.1% for the S&P 500 and nearly 2% for the Nasdaq in overnight trade.

Bond markets extended their retreat as investors braced for the Federal Reserve to take an even more aggressive approach to taming inflation. Two-year Treasury yields are up 76 basis points (bps) in March and 10-year yields are up almost 60 bps to 2.4154%, the highest since 2019.

The selloff, which began months ago, gathered momentum in recent sessions after Fed Chair Jerome Powell flagged the possibility of bigger-than-usual interest rate hikes. As a result, the rates-sensitive yen plumbed six-year lows of 121.41 per dollar on Wednesday.

“The move higher in yields stretching over the past two weeks has been the largest one since the global financial crisis and even then the moves were within a couple of basis points of what we are experiencing now,” said NatWest Markets’ rates strategist Jan Nevruzi.

“At some point the market might start pricing in an economic downturn, particularly if the Fed embarks on a series of 50 bp hikes.”

For now, investors have been impressed by U.S. economic strength – notwithstanding headwinds from war and inflation – and are wagering that big businesses with good cashflows can hold their own.