Asian bonds sold off as US yields spike; Philippine stocks slump

Most Asian bond yields pushed higher on Monday against the backdrop of a spike in US 10-year Treasury yields on expectations that massive government stimulus would lead to higher economic growth and inflation.

Regional equities, however, posted a mixed performance, with the Philippines market slipping most as a jump in COVID-19 casualties raised the possibility that partial lockdown measures in the capital of Manila could be extended.

Yields on benchmark US 10-year Treasury notes rose to a one-year high of 1.3822%, as falling COVID-19 infection rates, expectations of a stronger economic recovery and higher government borrowing in the United States dented their lustre.

The move sparked outflows in Indonesian 10-year bonds , generally favoured as a high-yield investment in the region, with yields rising to 6.673%, their highest since mid-October.

"With Bank Indonesia's easing cycle coming to an end, bond supply/ demand dynamics challenging, and our expectation for US yields to rise, we think the scope for IDR bonds to rally significantly is limited," analysts at Goldman Sachs wrote.

"As such, we recommend investors lighten duration risk and switch from 10Y and 20Y into the 5Y sector of the curve."

Thailand 10-year bond yields jumped to 1.570%, hitting their highest since early April last year, while India's benchmark bond yields hit their highest since late-August at 6.195%.

Malaysian benchmark bond yields were an exception, holding relatively steady at 2.956%, although they too have risen recently.

Analysts at HSBC said they favour Malaysian bond markets, noting it has the highest real policy rate in emerging markets, a status that is increasingly inconsistent with the country's growth and inflation outlook.

The Philippines stock market slipped 1.1%, while its currency, the peso, shed as much as 0.3% to hit its lowest since Oct. 23.

The Philippines reported 239 new coronavirus deaths on Saturday, the second-highest daily increase in casualties since the beginning of the pandemic.

President Rodrigo Duterte is due to decide next week on the future of coronavirus restrictions in Manila, which accounts for a significant chunk of the country's economic output.

South Korea's KOSPI reversed early gains to edge lower while the won also eased, despite upbeat export data.

Doctors in South Korea have threatened strike action in response to legislation to strip them of licences following criminal convictions, sparking fears about possible disruption of a coronavirus vaccination effort set to begin this week.