(Reuters) -Investors from outside Asia piled into bonds from the region in April, especially in the second half of the month, seeking to diversify from the United States in their quest for markets with stable, high yields and appreciating currencies.
These investors bought bonds worth $8.92 billion, on a net basis, in April, the highest for any month since last August, according to data from regulatory authorities and bond market associations in South Korea, India, Indonesia, Thailand and Malaysia.
Interest rate cuts in the region — in India, Thailand and the Philippines last month and in Indonesia earlier this month — also enticed investors as bond prices rose in tandem.
The highest inflows were into South Korea, where foreign investors bought $7.91 billion in bonds, the most since May 2023, although they pulled $6.97 billion from the equity market.
Investors also added $2.37 billion in Malaysian bonds and $1.6 billion in Thai bonds.
In contrast, Indonesia recorded net outflows of $1.4 billion due to concerns over potential fiscal slippages and sluggish growth.
Despite a rate cut, India recorded outflows of $1.55 billion, which analysts said was mainly due to nerves following the country’s short-lived military conflict with Pakistan.
U.S. President Donald Trump’s announcement of reciprocal tariffs early in April sparked turmoil across financial markets globally, but he announced a 90-day pause for most countries later in the month, which calmed investors and drew them back to markets, including the bond market, analysts said.
Market sentiment improved further this month after the U.S. and China agreed to a 90-day trade negotiation period during which the duo would lower import tariffs on one another.
However, bond markets remain under pressure. Long-dated U.S. Treasury yields are soaring, with bonds weighed by concerns over a worsening fiscal outlook and Moody’s recent downgrade of the U.S. credit rating.
“The global bond market has experienced extraordinary volatility amid heightened trade tensions and worries about public debt. Asian government bonds may not be immune to the sell-off, but the impact is expected to be manageable,” said Samuel Tse, an investment strategist at DBS Bank.
He said there is still room for the yield gap between emerging Asian government bonds and U.S. Treasuries to narrow, which makes Asian bonds appealing for investors looking at overall returns in local currency terms.
(Reporting by Gaurav Dogra, Patturaja Murugaboopathy in Bengaluru and Jiaxing Li in Hong Kong; Editing by Savio D’Souza)
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