Foreigners bought Asian bonds in November as trade tensions fade

By Patturaja Murugaboopathy and Gaurav Dogra

(Reuters) - Foreigners were net buyers of Asian bonds in November as concerns over Sino-U.S. trade war and higher U.S. yields abated, bolstering capital inflows into the region.

Data from central banks and bond market associations showed overseas investors bought a net $2.67 billion in Indonesian, Thai, South Korean, Indian and Malaysian bonds in the last month.

Foreign flows into Asian bonds https://tmsnrt.rs/2PuDRrv

"Bond flows in the region are proving more resilient, thanks to the decline in U.S. 10-year bond yields which have fallen from their recent high of 3.26% in October to 2.84% currently," said Khoon Goh, head of Asia research for ANZ Banking Group in Singapore.

Signals from the Federal Reserve that it may be nearing an end to its three-year rate hike cycle have pushed the 10-year U.S. Treasury yield to more than three-month lows below 3 percent.

In November, Indonesian and Indian bonds led the regional inflows, attracting foreign money of $2.54 billion and $772 million respectively. Their asset prices were also benefited due to a sharp fall in crude oil prices last month, since the two countries are the biggest importers of oil in Asia.

Also, Indonesia's raising of its benchmark interest rate for the sixth time in 2018 in November to tackle its current account deficit, boosted sentiment.

South Korean and Thai bonds also received inflows. However, Malaysian bonds saw an outflow of $1.25 billion last month.

Investors shunned Malaysian bonds as its economy grew at its slowest pace in two years in the July-September quarter due to weaker external demand.

Optimism ahead of a meeting between the presidents of China and the United States also boosted regional bonds last month. In the meeting, the two leaders agreed to a 90-day truce on further tariffs in their trade war.

However, investors are cautious about prospects of an agreement, as the truce lacked specific details.

"The year looks set to end with continued volatility in flows. This looks likely to continue into the new year as well," said ANZ's Goh.

(Reporting by Patturaja Murugaboopathy and Gaurav Dogra; Editing by Kim Coghill)