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Global Rates Volatility Forces Rethink on Asian Bonds

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TOKYOSHANGHAI, May 6 Reuters A pause in a broad selloff in U.S. treasuries and other global bonds last month has given foreign investors time to rethink their Asian holdings and shift money to safer markets such as China, away from riskier countries like Indonesia and India.

China, India and Indonesia were among the largest recipients of yieldseeking foreign investment last year.

But a divergence in economic recoveries from the coronavirus pandemic, a dollar rally and questions about the Federal Reserves resolve to keep U.S. rates low have forced fund managers to see some markets as safer than others.

Moreover, a surge in U.S. yields in the first quarter of 2021, the sharpest since late 2016, has blunted the appeal of some loweryielding Asian bond markets.

Within Asia, you have countries like Thailand, Singapore, and Malaysia that are now less attractive visavis the United States, said Leonard Kwan, an emerging markets fixed income portfolio manager at T. Rowe Price in Hong Kong. It would likely be those markets that we look to rotate out of, and into Treasuries.

In March, foreign investors turned net sellers of Chinese sovereign bonds for the first time in more than two years. But asset managers remain bullish because of Chinas high real yields and its close links to a rebound in global trade.

Chinas bond market saw a rare 8.95 billion yuan 1.38 billion drop in holdings by overseas investors in March as they trimmed positions in Chinese government bonds,…

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