Insights

Asian Bond Yields Climb Amid Changing Market Dynamics

Asian bond markets delivered negative returns in November 2025 as yields moved higher across the region. The iBoxx ABF Pan-Asia Bond Index fell by 0.41% on an unhedged basis, while the hedged version declined by 0.17%. Currency weakness added to the drag, with Asian currencies broadly depreciating against the US dollar, which detracted an additional 0.23% from performance.

State Street Investment Management Fixed Income Portfolio Strategists

January 6, 2026 8 min read

Asian bond yields rose by an average of nine basis points, reversing the declines seen in October 2025. The sharpest increases were recorded in South Korea (+28 basis points) and Indonesia (+24 basis points), reflecting global rate dynamics and domestic market adjustments. Other markets saw more moderate moves. On the policy front, November 2025 was relatively quiet. Most central banks across Asia kept their rates unchanged, maintaining a cautious stance amid mixed economic signals and uncertainty.

Market	Local Currency Bond Return	FX Return	Total Return (in USD)
Malaysia	0.4%	1.5%	2.0%
Philippines	0.8%	0.3%	1.2%
Thailand	0.3%	0.5%	0.9%
Hong Kong	0.7%	-0.2%	0.5%
China	-0.1%	0.5%	0.4%
Indonesia	-0.3%	-0.2%	-0.5%
Singapore	-1.0%	0.2%	-0.8%
Korea	-1.9%	-3.1%	-5.0%

Malaysian Ringgit Strengthens Amid Positive Market Sentiment

Malaysia (USD Unhedged: 2.0%)
Malaysia’s 10-year government bond yield declined by four basis points in November 2025. The Malaysian ringgit strengthened notably, contributing approximately 1.5% to returns, supported by improved investor confidence and favorable carry-trade dynamics (borrowing in a currency with a low interest rate and investing in an asset offering a higher potential return). Inflation remained contained, easing to around 1.3% year on year, while core inflation hovered near 2.2% in October 2025, aided by softer food and transport costs. Economic growth continued to show resilience, with third-quarter gross domestic product (GDP) growth expanding by 5.2% year on year. The unemployment rate held steady at 3.0%, signaling labor market stability, while the S&P Global Manufacturing Purchasing Managers’ Index (PMI) survey edged up to 50.1, marking its highest reading since May 2024 and indicating improving business conditions. Bank Negara Malaysia maintained its overnight policy rate at 2.75%, stating the decision was appropriate and supportive of economic growth amid stable prices.

Easing Inflation Could Prompt Rate Cut

Philippines (USD Unhedged: 1.2%)
The Philippines’ 10-year government bond yield declined by three basis points in November 2025, while the Philippine peso appreciated, contributing approximately 0.3% to currency returns and supporting modest positive US-dollar-unhedged performance. Headline inflation eased to 1.5% in November 2025 – well below Bangko Sentral ng Pilipinas (BSP) 2–4% target – while core inflation remained subdued, reinforcing expectations for further monetary easing. GDP growth for the third quarter of 2025 remained at approximately 4.0% year on year, constrained by slower infrastructure spending. With inflation benign and growth cooling, markets now expect BSP to cut the policy rate by 25 basis points at its December 2025 meeting.

Thailand Dented by Tariffs, Weak Production and Tourism Pullback

Thailand (USD Unhedged: 0.9%)
Thailand’s 10-year government bond yield rose by around three basis points in November 2025, while the Thai baht appreciated slightly, contributing approximately 0.5% to currency returns. Headline inflation remained in deflationary territory at -0.49% year on year for the eighth consecutive month, primarily due to lower energy prices. Meanwhile, core consumer price inflation edged up modestly to 0.66% year on year. The Manufacturing PMI survey rose to 56.8, its highest level since May 2023, indicating robust demand and strong business sentiment. Thailand’s GDP grew by 1.2% year on year in the third quarter of 2025, slowing sharply from the 2.8% growth seen in the second quarter of 2025 and falling short of market expectations of 1.6%, weighed down by weak factory output, softer tourism activity, and rising concerns about the impact of higher US tariffs. The unemployment rate declined to 0.76% in the third quarter of 2025.

Economic Momentum Continues in Hong Kong

Hong Kong (USD Unhedged: +0.5%)
In November 2025, Hong Kong’s 10-year government bond yield rose by seven basis points, while the Hong Kong dollar detracted an estimated 0.2% from the unhedged returns. Inflation continued to edge higher, with the consumer price index rising to around 1.2% year on year, up from 1.1%, reflecting mild price pressures across housing, energy, and food. The labor market remained tight, as the unemployment rate edged down slightly to approximately 3.8%, supported by stable consumer demand and strong tourism inflows. The economy maintained its momentum, with GDP growth for the third quarter of 2025 holding at 3.8% year on year. Business activity accelerated, with the S&P Global SAR PMI survey rising to 52.9 in November 2025 – the best reading since March 2023 – indicating robust expansion in output and new orders.

China’s Deflationary Risks Dissipate

China (USD Unhedged: 0.4%)
China’s markets showed cautious improvement in November 2025. The 10-year government bond yield rose by four basis points, while the two-year yield edged up by one basis point, indicating mild upward pressure on rates. The Chinese yuan strengthened slightly, delivering a +0.5% return, supported by policy stability and liquidity measures. Inflation continued its gradual recovery, with the consumer price index (CPI) rising by 0.2% year on year and the producer price index (PPI) narrowing to -2.1% in October 2025, signaling an easing of deflationary risks. However, fixed-asset investment remained weak, contracting by 1.7%, mainly due to persistent stress in the property sector despite modest infrastructure gains. Manufacturing activity softened, with the PMI survey registering at 49.9, while the services PMI survey slipped to 52.1. External trade showed resilience, with exports growing by 5.9% year on year and imports rising 1.9%, though global demand uncertainty persisted. Labor conditions were broadly stable, with urban unemployment at 5.1%, but youth joblessness stayed elevated. The People’s Bank of China kept its key lending rates at record lows for the sixth consecutive month in November 2025, in line with market expectations. Meanwhile, China’s economy expanded by 4.8% year on year in the third quarter of 2025, down from 5.2% in the second quarter of 2025, marking its slowest pace since the third quarter of 2024.

Recovering Demand and Improving Production

Indonesia (USD Unhedged: -0.5%)
In November 2025, Indonesia recorded a modest rise in its 10-year government bond yield, up by 24 basis points, while Indonesian rupiah returns fell by 0.2%. Headline inflation eased to 2.72% year on year, down from October 2025, with core inflation steady at 2.36%, keeping price growth well within the Bank Indonesia (BI) target range of 1.5% to 3.5%. The economy grew at a solid pace, expanding by 5.04% year on year in the third quarter of 2025, supported by private consumption and investment. The S&P Global PMI survey climbed to 53.3 – its highest level since February 2025 – driven by strong domestic demand, rising production, and employment, although export orders remained weak. At the central bank’s November 2025 policy meeting, the BI rate was left unchanged at 4.75%, in line with expectations and aimed at supporting the Indonesian rupiah.

Labor Market Strength Balanced by Softer Growth

Singapore (USD Unhedged: -0.8%)
Singapore’s 10-year government bond yield rose by 12 basis points in November 2025, while the Singapore dollar appreciated by 0.2%. Headline inflation eased to approximately 1.2% year on year, and core inflation moderated to the same level in October 2025. The unemployment rate held steady at 2.0% in the third quarter of 2025, supported by resilient labor market conditions. The Manufacturing PMI survey inched up to 50.2, driven primarily by the electronics sector, which accounts for about 40% of total manufacturing output. Meanwhile, Singapore’s economy expanded by 4.2% year on year in the third quarter of 2025, slightly lower than the upwardly revised 4.7% growth recorded in the second quarter of 2025.

The Bank of Korea Adopts a Dovish Stance

South Korea (USD Unhedged: -5.0%)

South Korea’s 10-year government bond yield rose by 28 basis points in November 2025, while the South Korean won depreciated, accounting for -3.1% of the market’s total return. Headline inflation remained steady at 2.4% year on year, with core inflation touching 2.2%, reflecting persistent food and energy cost pressures. The Bank of Korea kept its policy rate unchanged at 2.50%, signaling caution amid currency weakness and global rate uncertainty. Labor market conditions softened slightly as unemployment edged up to 2.6%, while manufacturing activity contracted for the second month, with the PMI survey at 49.4 on weaker domestic demand. Export growth provided some support, rising by around 8.4% year on year, led by semiconductors and automobiles.

Footnotes

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