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Asia Bonds See Record Sell-Off Amid Yield Surge
17 Oct
Summary
- Asian bonds experienced the heaviest foreign selling in over six years in September.
- Foreign investors withdrew a net $8.21 billion from regional bonds.
- Rising US Treasury yields and Fed tightening fueled the investor caution.
Asian bonds experienced unprecedented foreign selling pressure in September, marking the heaviest outflows in more than six years. International investors divested a net total of $8.21 billion from bonds in India, Indonesia, Malaysia, South Korea, and Thailand. This significant capital withdrawal from regional debt markets followed a substantial outflow of approximately $23.49 billion from regional equities during the same period.
The primary drivers behind this trend were a sharp surge in US Treasury yields and the anticipation of continued monetary tightening by the Federal Reserve. The benchmark US 10-year Treasury yield climbed significantly, reaching a 24-1/2-year high in September. This increase in global bond yields, coupled with elevated oil prices potentially fueling inflation, heightened investor caution.
South Korea recorded the largest outflows, with foreign investors selling approximately $6.3 billion in bonds. Thailand, India, Malaysia, and Indonesia also saw foreign capital exits, with outflows of $822 million, $548 million, $436 million, and $100 million, respectively. This broad-based weakness reflects a more cautious global risk environment.
