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Asian Bond Yields Rise in Tandem with Global Yields

On average, Asian 10-year yields rose by 32 basis points in April 2024. Conversely, China’s long-term yield rose by two basis points as data remained weak.


SSGA Fixed Income Portfolio Strategists

Except for China, bond yields in most Asian markets rose in April 2024. This was in line with the increase in yields witnessed across Western economies. The Markit iBoxx ABF Pan-Asia Index returned -0.8% on a US-dollar-hedged basis. In addition, nearly all Asian currencies declined against the US dollar, leading to an unhedged index return of -2.1%. On average, ten-year yields in Asian markets were up by 32 basis points, with the Philippines seeing the most significant hike (+73 basis points), followed by Indonesia (+53 basis points).

In contrast, China’s 10-year yield rose by just two basis points, as economic momentum remained weak – particularly in consumption and the real estate sector – leading market participants to expect further policy stimulus. Economic data releases outside China were still quite mixed, with consumer inflation rising in several markets. Future inflation expectations also increased in the US and eurozone, leading to upward pressure on bond yields globally, including those in Asia.

Market Local Currency Bond Return FX Return Total Return (in USD)
China 0.4% -0.2% 0.2%
Hong Kong -0.5% 0.0% -0.4%
Malaysia -0.5% -0.8% -1.3%
Singapore -2.0% -0.8% -2.8%
Thailand -1.9% -1.5% -3.4%
Korea -1.1% -2.6% -3.7%
Indonesia -1.4% -2.6% -4.0%
Philippines -2.9% -2.5% -5.3%

Better-Than-Expected GDP Growth in China with low borrowing costs

China (+0.2%) was the best-performing market in the Markit iBoxx ABF Pan-Asia Index, delivering +0.2% in US-dollar terms and +0.4% in Chinese-yuan terms. Long-term bond yields remained nearly unchanged, with positive price and income returns. Gross domestic product (GDP) growth for the first quarter of 2024 registered at 5.3%, which was much better than the expected +4.8%. However, most other economic data releases remained weak. Consumer price inflation, the net trade balance, industrial production, and retail sales all indicated a downward trend. In a move aimed at supporting the Chinese yuan, which was at its lowest level since November 2023, the People’s Bank of China kept interest rates, including the medium-term lending facility rate, unchanged at its April 2024 policy meeting. While the widely expected policy decision resulted in a liquidity withdrawal of 70 billion yuan from the banking system, bond yields remained at almost multi-decade lows, which, in turn, keep down long-term borrowing costs.

Hong Kong bond yields near muti-decade highs

Hong Kong (-0.4%) posted negative returns in US-dollar-denominated and Hong Kong-dollar terms (-0.5%). The 10-year yield rose by 28 basis points in April 2024, which aligned with the increase in global bond yields and led to a negative price return. The Hong Kong dollar outperformed other Asian currencies in April 2024, given its peg to the US dollar. Economic data releases remained mixed, with Purchasing Managers' Index surveys and retail sales improving (although the latter was lower than anticipated). At the same time, consumer inflation was marginally below market expectations when it remained in a narrow range.

Trade Balance rebounds in Malaysia

Malaysia (-1.3%) delivered negative returns in US-dollar-denominated and Malaysian-ringgit terms (-0.5%). Ten-year bond yields rose by 12 basis points in April 2024, which was lower than the average increase seen in other Asian economies. First-quarter 2024 GDP growth was in line with expectations at +3.9%. This was an improvement in the growth rate witnessed in the fourth quarter of 2024. However, consumer inflation was lower than predicted, and the manufacturing PMI survey indicated a slowdown. April 2024 also revealed that Malaysia’s trade balance was marginally better than anticipated, and the Malaysian ringgit suffered a smaller decline compared to other regional currencies.

Softer Growth Data and Mixed Economic Newsflow

Singapore (-2.8%) saw negative returns in US-dollar-denominated and Singapore-dollar terms (-2.0%) as the 10-year yield rose by +34 basis points, in line with the trend of rising global bond yields. First-quarter 2024 GDP growth data registered at +2.7%, which was lower than the anticipated +3%. Economic data releases were mixed with surprisingly strong retail sales and unexpectedly weak industrial production. Consumer inflation moved higher, although the increase was less than the market had predicted. At its policy meeting, the Monetary Authority of Singapore (MAS) maintained the appreciation rate of the Singapore dollar’s nominal effective exchange-rate policy band with no changes to its width or level. The MAS continued to express its concern about inflation, and market participants do not expect any near-term alterations in Singapore’s monetary policy.

No Change in Thailand’s Monetary Policy

Thailand (-3.4%) revealed a negative return in US-dollar terms. The Thai-baht-denominated return (-1.9%) was impacted by a 26-basis point increase in the long-term 10-year bond yield. Economic data releases were mixed with PMI surveys improving, although Thailand’s trade balance was lower due to declining exports. While consumer inflation continued to ease and remains in deflation, the Bank of Thailand kept interest rates unchanged at its April 2024 policy meeting. The benchmark interest rate was maintained at its highest level in more than a decade. The policy move contrasted with explicit government statements about lowering borrowing costs as inflation was below the target range. Market participants expect two interest rate cuts throughout 2024.

Inflation Persists in South Korea

South Korea (-3.7%) also saw negative returns in US-dollar-denominated and South Korean-won terms (-1.1%). This stemmed from a 25-basis point rise in the 10-year bond yield. First-quarter 2024 GDP growth data stood at +3.4%, which was much better than the expected +2.5%. Inflation in South Korea was also marginally stronger than anticipated. However, other key economic indicators, such as industrial production, retail sales, and net trade, were surprisingly weak. As widely expected, the Bank of Korea kept the base rate unchanged (+3.5%) at its April 2024 policy meeting, emphasizing the need for progress on price stability before considering monetary easing.

Surprising Central Bank Move in Indonesia

Indonesia (-4.0%) posted a negative return in US-dollar-denominated and Indonesian-rupiah terms (-1.4%). This was driven by a significant 53-basis point increase in the 10-year bond yield. First-quarter 2024 GDP growth was in line with expectations at +5.1%. However, both headline and core inflation remained firm. In an unexpected development, Bank Indonesia (BI) raised the 7-day key policy rate by 25 basis points to +6.25% - its highest level since 2016. The move was mainly intended to support the Indonesian rupiah, which was close to a historic low against the US dollar. In another unusual move, the BI governor also mentioned that the central bank expects the Indonesian rupiah-US dollar exchange rate to strengthen to 16,000 rupiah by the third quarter of 2024 and 15,800 rupiah by the fourth quarter of 2024.

Philippine Peso Remains Weak

Philippines (-5.3%) delivered negative US-dollar-denominated and Philippine-peso returns (-2.9%). The long-term 10-year yield rose by a significant 73 basis points in April 2024, the highest among its Asian peers. Consumer inflation increased, but the rise was marginally below market expectations. However, the Philippine peso remained one of the weakest Asian currencies in April 2024, as trade data continued to show a deficit. The Bangko Sentral ng Pilipinas (BSP) kept interest rates unchanged at its April 2024 policy meeting amid accelerating inflationary pressures. The BSP also indicated that its inflation projections could move higher. Market participants expect the central bank to keep interest rates on hold in the near term and start its rate-cutting cycle once the US Federal Reserve does the same.

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