Foreign investors buy Asian bonds in May as US yields drop

Foreigners had been net buyers of Asian bonds in May, helped by a drop in US bond yields and a restoration in the area’s financial exercise.

The bond inflows had been in distinction to the outflows skilled by regional fairness markets final month, nevertheless, the online purchases in Asian bonds had been the bottom in 4 months as a result of worries over a resurgence of regional coronavirus instances.

Overseas investors purchased a web $4.7 billion value of Asian bonds final month, the bottom since January this 12 months, information from regulatory authorities and bond market associations confirmed.

Foreigners bought a web $5 billion value of South Korean bonds, marking a fifth straight month of inflows. That pushed the holdings of abroad investors in South Korean bonds to eight.3% on the finish of May, the very best since no less than 2014.

“Because of South Korea‘s strong growth recovery and shorter timeline to policy lift-off, 10Y Korean bond yields have been trading at historically wide spreads to US Treasuries and other peer EM low-yielders,” stated Duncan Tan, a strategist at DBS Bank.

“Even on an FX-hedged basis, Korean bonds also continue to offer consistently high pick-ups over US Treasuries.”

Malaysian bonds additionally attracted $453 million value of overseas cash, which was the thirteenth consecutive influx.

On the opposite hand, Indonesia and Indian bonds confronted outflows value $501 million and $237 million, respectively.

Jennifer Kusuma, Asia charges strategist at ANZ, stated she sees extra room for overseas investor flows into the area, facilitated by enhancing international danger sentiment and as vaccination drives collect tempo in quite a lot of economies in Asia.

“For the region, the improved performance of Chinese asset markets may also develop into a fresh driver of strength. We expect better buying interest for LCY (local currency) bonds near term,” she stated.

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