Asian bonds enjoyed foreign inflows for the eighth consecutive month in December as investors hunting for higher yields were drawn in by the region’s faster recovery from the pandemic.
Asian bonds saw a combined total inflow of $3.03 billion last month, the most in three months, data from regional central banks and bond market associations in Indonesia, Malaysia, Thailand, South Korea and India showed.
Foreign flows into Asian bonds https://fingfx.thomsonreuters.com/gfx/mkt/azgpoemokpd/Foreign%20flows%20into%20Asian%20bonds.jpg
In January, Indonesian bonds attracted inflow of $1.57 billion, the highest in the region, followed by South Korea and Malaysia, which saw inflows of $1.04 billion and $909 million, respectively.
On the other hand, Indian and Thailand bonds faced outflows worth $342 million and $139 million, respectively.
However, some analysts doubt if the inflows into the regional bonds would sustain, since the U.S. yields have risen sharply in the past few weeks on expectations of greater fiscal stimulus.
U.S. 10-year Treasury yield climbed to 1.2% this week, the highest in over 10 months.
“Six months ago, all Asia curves were steeper than the US (2Y-10Y segment). Now, only Philippines, Indonesia and India curves are steeper than that of the US,” said DBS in a report this week.
“The relative steepness of curves has a direct impact on the relative attractiveness of bonds, and by extension, could influence the strength of capital inflows into the region.”
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