Asia bonds soar on US rate cut bets, exports

Asian bonds saw their largest monthly inflow in three months in February, driven by expectations of a US Federal Reserve rate cut and strong regional exports, Reuters reported on Wednesday.

Foreign investors net purchased $4.41 billion of bonds in India, South Korea, Malaysia, Indonesia, and Thailand. Indian bonds saw a surge in demand with a net investment of $2.7 billion, the highest since July 2017, ahead of their inclusion in JP Morgan’s emerging market debt index.

South Korean bonds also attracted $2.59 billion, their largest inflow in nine months, boosted by a surge in exports, particularly in the semiconductor industry.

However, Thai, Malaysian, and Indonesian bonds saw net outflows. Despite expectations of no immediate rate cut, US central bankers may indicate a more gradual approach to interest rate reductions and a later start to policy easing.

ANZ’s head of Asia Research, Khoon Goh, expects the prospects of Fed easing, Asia’s improving export outlook, and a favourable growth-inflation mix to attract inflows into the region.