SYDNEY, May 30 ― Asian stocks were mostly higher today as investors cheered the prospect that the world's largest economy will avert a major debt default, improving sentiment across most asset classes.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 per cent early today, after US stocks were closed on Monday for the Memorial Day holiday. The index is down 1.3 per cent so far this month.

Australian shares were up 0.03 per cent while the Nikkei stock index slipped 0.28 per cent, cooling a bit after the Japanese benchmark hit a 33-year high on optimism over the US debt deal and a weaker yen, which helps the country's exporters.

Hong Kong's Hang Seng Index climbed 0.31 per cent while China's CSI300 Index dipped 0.06 per cent.

In Asian trade, longer-dated US Treasuries rallied on Tuesday as bond traders welcomed the deal to suspend Washington's borrowing limit.

Despite the cheer, investors say markets are not out of the woods year.

“The US had a poor resolution to the debt ceiling negotiations with still a huge increase in government debt and no real cuts to spending but has relieved pressure for now,” said James Rosenberg, an advisor at broker Ord Minnett in Sydney.

“There's still a huge disconnect between bond markets and equities. The bond market is implying there is an extreme 70 per cent probability on a US recession in the next year. These signals stand in stark contrast to the resilient equity market.”

The deal suspends the debt ceiling until January 2025 in exchange for caps on spending and cuts in government programmes.

Narrow margins in the House of Representatives and Senate mean moderates from both sides will have to support the bill for it to pass.

Benchmark 10-year yields dropped 6 basis points at the open of trade in Tokyo to 3.7596 per cent. Thirty-year yields fell 5.5 bps to 3.9207 per cent.

While US cash markets were closed yesterday, S&P 500 e-minis were up 0.32 per cent, reflecting the positive reaction to the debt deal.

With the debt deal heading to Congress for approval, JB Were analysts said there could be up to US$600 billion (RM2.76 trillion) worth of bill issuance in the next six to eight weeks.

“As liquidity gets drained from the banking system with bill issuance, what impact could that have on broader markets? Some estimates suggest it could be the equivalent of one 25 basis points rate hike as far as financial conditions are concerned,” the investment firm's analysts wrote in a note on Tuesday.

The dollar rose 0.02 per cent today against the yen to 140.47, just below the year's high of 140.91 hit yesterday.

The euro was up 0.1 per cent on the day at US$1.0714, having lost 2.78 per cent in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, slipped to 104.23, just off a more than two-month high. It was also trading near a six-month peak against the Chinese yuan.

US crude ticked up 0.3 per cent to US$72.89 a barrel. Brent crude fell to US$77.05 per barrel.

Gold was slightly lower with the spot price at US$1,942.39 per ounce. ― Reuters