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Asian bonds attracted foreign inflows for a fourth successive month in August on optimism that the U.S. Federal Reserve will start easing interest rates in September.
Overseas investors made substantial purchases of regional bonds in Indonesia, India, Malaysia, South Korea and Thailand, totalling a net $14.06 billion in August - the largest monthly net purchases since at least 2019, according to data from regulatory authorities and bond market associations.
South Korean bonds saw their largest foreign inflow since May 2023, attracting $5.99 billion. Indonesian bonds also continued to draw interest, with $3.5 billion in investments, marking the fourth consecutive month of net gains from overseas.
Additionally, bonds from India, Malaysia, and Thailand attracted $2.14 billion, $2.06 billion, and $370 million, respectively.
Traders are increasingly betting that the Federal Reserve will opt for a substantial interest-rate cut this week to head off further deterioration in the labour market, rather than choose a smaller initial reduction.
Analysts expect some Asian central banks to follow suit, with the Bangko Sentral ng Pilipinas (BSP) having already cut its interest rates by 25 basis points in August.
"Bond inflows should stay strong, as the Fed easing cycle paves the way for Asian central banks to cut rates," said Khoon Goh, head of Asia Research at ANZ.
"We expect Bank Indonesia(BI)and the Bank of Korea(BoK)to join the rate cut cycle after the Fed moves," he said.
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Sharon Singleton)