Asian Bonds Suffer Outflows Amid US Election Uncertainty
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Foreign investors pulled funds from most Asian bond markets outside of China in October, driven by caution ahead of the US presidential election, reports Mint.
The potential for a Donald Trump victory, which ultimately materialized, fueled concerns about increased inflation due to Trump's proposed tariffs and tax cuts. These concerns dampened expectations for the rapid rate cuts that had previously supported regional bonds.
Foreign investors sold local bonds in Malaysia, Thailand, and India, resulting in a net outflow of $3.8 billion. This marks a reversal from the previous five months, which saw consecutive net purchases.
Trump's decisive win has led analysts to adopt a more pessimistic outlook on foreign investment flows into Asian bonds.
Eugene Leow, senior rates strategist at DBS Bank, attributed the pressure on Asian government bonds and interest rates to a stronger dollar and rising Treasury yields, driven by increased bets on Trump-related trades.
"Optimism that was initially sparked by Fed easing bets around the middle of the year have largely evaporated," Leow said. "Against this challenging backdrop, scope for Asia central bank easing has become more restrained while investor sentiment on local currency bonds have also become more muted."
The US dollar, poised for significant weekly gains, is trading near one-year highs following a hawkish shift from the Federal Reserve chair, which boosted short-term Treasury yields.
In contrast, South Korean bonds saw a net inflow of $4.03 billion last month, fueled by optimism surrounding South Korea's upcoming inclusion in the FTSE Russell's World Government Bond Index in November 2025. Indonesian bonds also received approximately $1.5 billion, marking the sixth consecutive month of foreign inflows.