Asian bond markets post biggest foreign outflow since March 2020
September brings the heaviest foreign selling of Asian bonds in more than six years as rising global yields weaken demand for emerging-market debt. Net withdrawals from bonds in five regional markets reach $8.21 billion, adding to a broader pullback that also hits Asian equities.
Highlights
- Foreign investors sold a net $8.21 billion of bonds in India, Indonesia, Malaysia, South Korea, and Thailand in September, the largest outflow since March 2020.
- A sharp 53.5 basis point surge in the U.S. 10-year Treasury yield to a 24-1/2-year high of 5.3645% drove the September Asian selloff.
- South Korea led regional bond outflows with $6.3 billion in net sales, alongside $23.49 billion in foreign outflows from regional equities, signaling broad risk reduction.
September selloff tracks rise in U.S. yields
As reported by Reuters, data from regulators and bond market bodies show foreign investors sell a net $8.21 billion of bonds in India, Indonesia, Malaysia, South Korea and Thailand in September, the largest monthly withdrawal since March 2020, when outflows reached $17.28 billion.The retreat comes as the benchmark U.S. 10-year Treasury yield surges 53.5 basis points during the month and reaches a 24-1/2-year high of 5.3645%. Concerns that elevated oil prices could fuel inflation strengthen expectations of further rate hikes by major central banks, reducing appetite for regional debt.
Khoon Goh, head of Asia research at ANZ, says the broad-based weakness points to a more cautious global risk environment, with investors cutting exposure across bonds and equities as the Federal Reserve tightening cycle starts and global bond yields rise.
South Korea leads regional bond outflows
South Korea records the largest bond outflow in the region, with foreign investors offloading about $6.3 billion in September. That marks the country’s biggest monthly net sales since March, when divestments total $7.25 billion.Thai, Indian, Malaysian and Indonesian bonds also register foreign outflows of $822 million, $548 million, $436 million and $100 million, respectively. The bond selloff coincides with about $23.49 billion in foreign outflows from regional equities, underscoring a wider reduction in risk exposure across Asian markets.
In our earlier article on the surge in long-term U.S. borrowing costs, we explained how Treasury yields above 5% are tightening financial conditions by lifting mortgage rates and expanding federal interest expenses as deficits near $2 trillion. We also noted that persistent fiscal strain, heavy debt issuance and a broader competition for capital can keep yields elevated—setting the stage for knock-on effects in global markets as investors reassess risk and funding costs.
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