Asian bonds sell off in May as investors hunt for better yield

Asian bond markets witnessed a second consecutive month of outflows in May and will likely come under more pressure as major central banks tighten their monetary policies this year. Data from central banks and bond market associations showed foreign investors sold a total of $3.8 billion in India, Indonesia, Thailand, South Korea and Malaysian bonds in the last month.
"The recent monetary policy decisions by major central banks such as the ECB announcing to end its bond buying programme soon, and the more hawkish view by the US Fed may result in foreign funds leaving emerging markets in search for better yields elsewhere," analysts said in a Maybank report. Malaysian bond markets led regional outflows in May as investors turned more cautious following a shock election result which brought about a change in government for the first time since the country's independence. Foreigners sold $3.24 billion of Malaysian bonds last month, the biggest since March 2017.
Indian bonds faced foreign outflows of $2.9 billion, while Indonesian bonds saw outflows of $830 million. India and Indonesia have the biggest current account deficits in the region and are thus vulnerable if they have to attract foreign money to foot bigger oil bills. In efforts to curb capital outflows, the Indonesian central bank hiked interest rates twice last month, while India also increased its rates in early June.
However, the impact of central bank moves on their currencies and bond prices have so far been muted. South Korean bond markets bucked the regional outflow trend in May with foreign inflows of $3 billion, helped by easing tensions on the Korean peninsula.