Asian bonds record biggest monthly foreign outflow since March 2020

Asian bonds ⁠faced ⁠in September their heaviest ​foreign selling pressure in more than six years, ​as a sharp rise ‌in US Treasury yields and renewed Federal Reserve tightening blunted investors' appetite for emerging-market debt.

Foreigners sold a net $8.21 billion of regional bonds in India, Indonesia, Malaysia, ​South Korea ⁠and Thailand, for their largest monthly net withdrawal since the $17.28 billion sold in March 2020, data from regulators and bond ‌market bodies showed.

The overseas capital outflow from regional bonds came in addition to an outgo of about $23.49 billion from regional equities.

"The broad-based ⁠weakness suggests a more cautious global risk environment, with investors reducing exposure across both asset classes, as the Fed tightening cycle starts and global bond yields rise, amid elevated oil prices," said ​Khoon Goh, the head of Asia research at ANZ.

"Debt outflows across the region show the impact ​that ‌higher global bond yields are having," ANZ's Goh said.

The benchmark US 10-year Treasury yield surged 53.5 basis ​points ⁠in September and hit a 24-1/2-year high of 5.3645% on concerns that high oil ⁠prices could fuel inflation, bolstering expectations of further rate hikes by major central banks.

The US Fed raised interest rates last month and signalled more hikes ⁠in the coming months.

Foreign investors offloaded about $6.3 ​billion in South Korean bonds last month, for their largest monthly net sales since divestments of $7.25 billion in March.

Thai, Indian, Malaysian and Indonesian ‌bonds also saw foreign ⁠outflows of $822 million, $548 million, $436 ​million and $100 million, respectively.