Asian bonds see first monthly foreign outflow in five months

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(Reuters) -Foreign investors pulled funds from Asian bonds in June for the first time in five months, as concerns over a U.S. tariff deadline and heightened tensions in the Middle East weighed on sentiment.

They divested a net $2.11 billion worth of local bonds during the month, registering the first monthly net sales since January, data from regulatory authorities and bond market associations in India, Indonesia, Thailand, Malaysia and South Korea showed.

Foreigners have, however, still pumped a net $31.97 billion into Asian bonds, so far this year, the biggest figure for the first six months since 2021.

U.S. President Donald Trump last week, postponed his tariff deadline to August 1, but announced 25% tariffs for key regional trade partners Japan and South Korea.

Last month, Indonesian bonds witnessed approximately $1.9 billion worth of foreign outflows, the largest amount since November 2024. 

President Donald Trump said on Tuesday, the U.S. would impose a 19% tariff on goods from Indonesia under a new agreement with the Southeast Asian country.

Foreigners also shed $1.29 billion of Malaysian bonds, $883 million of Thai bonds and $717 million of Indian bonds last month.

“Foreign investors sold debt assets from Indonesia, Malaysia and Thailand as elevated geopolitical tensions led investors to shift to safer assets in June,” said Khoon Goh, head of Asia research at ANZ.    

Bucking the trend, South Korean bonds attracted a net $2.68 billion worth of foreign inflows, with net cross-border purchases extending into a fifth successive month.

“We continue to believe that Asia’s local government bonds are well positioned for a decent performance, supported by accommodative central banks amid an environment of benign inflation and moderating growth,” said Nikko Asset Management in a report last week.    

(Reporting by Gaurav Dogra in Bengaluru; Editing by Sharon Singleton)