Unprecedented Asian Bond Sell-Off in October: How US Election Jitters Triggered Alarming Foreign Outflows
In October, foreign investors divested significantly from various Asian bond markets, excluding China, as they braced for the uncertainties tied to the U.S. presidential election. Concerns surrounding a Donald Trump presidential victory, which subsequently materialized, heightened fears of inflation due to his proposed tariffs and tax cuts. This prospect diminished the likelihood of rapid rate cuts, which had previously buoyed regional bonds throughout the year. As a result, overseas investors pulled out a net $3.8 billion from local bonds in Malaysia, Thailand, and India, snapping a five-month streak of net purchases, according to data from regulatory authorities and bond market associations.
Trump’s resounding victory in the election has prompted analysts to adopt a more cautious outlook on foreign investments in Asian bonds. Eugene Leow, a senior rates strategist at DBS Bank, noted that a stronger U.S. dollar and rising Treasury yields—driven by increased speculation on Trump-related financial strategies—are putting pressure on Asian government bonds and interest rates. “The optimism initially spurred by Federal Reserve easing bets around mid-year has largely dissipated,” Leow commented. Amidst this challenging environment, the potential for further easing by Asian central banks appears limited, and sentiment regarding local currency bonds has turned subdued.
In contrast, foreign investments in South Korean bonds rose by $4.03 billion last month, fueled by optimism over South Korea’s forthcoming inclusion in the FTSE Russell’s World Government Bond Index in November 2025. Moreover, Indonesian bonds experienced about $1.5 billion in foreign inflows, marking a sixth successive month of positive investment. Meanwhile, the U.S. dollar was on track for substantial weekly gains, nearing one-year highs, spurred by a hawkish shift from the Federal Reserve chief, which sent short-term Treasury yields soaring.
This analysis highlights the mixed reactions of foreign investors towards Asian bonds in light of global geopolitical and economic shifts.
Original Story https://www.livemint.com/news/world/most-asian-bonds-faced-foreign-outflows-in-oct-on-us-election-jitters-11731653619591.html
Category :
Tags:
