Insights

Asian Bonds Navigate Global Volatility with Stable Yields and Steady Demand

Asian bonds saw moderate movement in March 2025, with the Markit iBoxx ABF Pan-Asia Index returning +0.4% in US dollar (USD)-hedged terms. Asian currencies, on average, saw consolidation and gained nearly 0.2%. This resulted in a +0.6% return for the index in unhedged terms. In the first quarter of 2025, the Markit iBoxx ABF Pan-Asia Index returned +1.7% in both unhedged and USD-hedged terms.

2025年5月9日

SSGA Fixed Income Portfolio Strategists

Ten-year yields saw little change overall in March 2025. However, over the quarter, average yields declined by six basis points, with significant dispersion among markets. For instance, in Hong Kong and Singapore, 10-year yields fell by 24 and 18 basis points, respectively. This aligned with the trend in the US. However, Chinese 10-year yields rose by 14 basis points during the quarter.

Global rates saw significant regional dispersion in March 2025, with 10-year sovereign yields trading higher in eurozone markets, rising by more than 30 basis points on average. This was triggered by the European Union’s proposed fiscal stimulus measures, including a significant EUR 800 billion in defense spending along with Germany’s EUR 500 billion infrastructure and energy plan. In contrast, sovereign 10-year yields remained unchanged in the US, rising by a modest 10 basis points in Japan and Australia, with limited movement in Asia.

In March 2025, the European Central Bank, along with the Swiss National Bank and Bank of Canada, cut policy rates by 25 basis points each, while central banks in Denmark, Turkey and Mexico also reduced borrowing costs. In contrast, Brazil’s central bank hiked rates by 1.0% to the highest level in a decade.

Market	Local Currency Bond Return	FX Return	Total Return (in USD)
Thailand	1.4%	0.7%	2.2%
Philippines	0.6%	1.2%	1.9%
Singapore	0.6%	0.7%	1.3%
Malaysia	0.5%	0.5%	1.1%
Hong Kong	0.9%	0.0%	0.9%
China	-0.4%	0.5%	0.1%
Indonesia	-0.3%	0.1%	-0.2%
Korea	-0.1%	-0.7%	-0.7%

Long-Term Bond Yields Slide in Thailand

Thailand (USD unhedged: +2.2%): Thailand emerged as the strongest performer in the Markit iBoxx ABF Pan-Asia Index in March 2025. The 10-year bond yield declined by 10 basis points, posting a Thai-baht return of 1.4% with positive price and income components. Consumer inflation eased from an eight-month high of 1.32% in January 2025 to 1.08% in February 2025, year on year. This was below the expected 1.1%. Key economic data was weak as the manufacturing Purchasing Managers’ Index (PMI) survey fell into contractionary territory as weaker demand conditions impacted new orders. Industrial production saw a seventh straight month of decline and the steepest drop in this sequence. Retail sales fell by 1.0% year on year in January 2025, marking the first decrease since March 2024. Trade, on aggregate, contributed positively.

Philippines Sees Lower Inflation and Falling Unemployment

Philippines (USD unhedged: +1.9%): The Philippine 10-year bond yield edged up by two basis points, delivering a 0.5% return in Philippine-peso terms with positive income and price components. Consumer inflation slowed from 2.9% to 2.1% year on year in February 2025, below the expected 2.6%, with moderating food and housing utilities prices. The manufacturing PMI survey eased for a second consecutive month as the growth in new orders and output slowed, leading to a softer increase in purchasing activity. The unemployment rate in the Philippines fell to 4.3% in January 2025, while the trade deficit narrowed to USD 3.2 billion as exports continued to rise.

Uneven Economic Newsflow in Singapore

Singapore (USD unhedged: +1.3%): Singapore’s 10-year government bond yield declined by five basis points, delivering a 0.5% return in Singapore-dollar terms with positive income and price components. Consumer inflation eased from 1.2% to 0.9% year on year in February 2025, slightly below the expected 0.95%, marking the weakest print since February 2021. Key economic indicators remained mixed as the manufacturing PMI survey continued to expand, although at a slower pace, due to a decrease in new orders, new exports, input purchases, and employment. Industrial production data fell by 1.3% year on year in February 2025. This was the first decline since June 2024. Retail sales grew by 4.5% in January 2025, the strongest expansion in a year. Trade data, on aggregate, disappointed.

A Surge in Malaysian Retail Sales

Malaysia (USD unhedged: +1.1%): Malaysia’s 10-year government bond yield declined by one basis point, delivering a 0.5% return in Malaysian-ringgit terms with positive income and price components. The consumer price index eased to a one-year low of 1.5% year on year in February 2025 (from 1.7% in January 2025), with slowing housing and transportation prices. Key economic data remained mixed, with the manufacturing PMI survey moving closer to stabilization as new orders increased for the first time since the third quarter of 2024. Industrial production marked its softest expansion in six months due to moderating manufacturing growth. Retail sales accelerated from a one-year low of 5.4% in December 2024 to 8.4% in January 2025, fueled by growing demand for recreational goods, food and beverages. At its March 2025 policy meeting, Bank Negara Malaysia maintained its key interest rate at 3.0% for the tenth consecutive period. This aligned with the market’s expectations for inflation and growth.

Hong Kong Rates Remain on Hold

Hong Kong (USD unhedged: +0.9%): Hong Kong’s 10-year bond yield fell by 11 basis points, delivering a 0.9% return in Hong Kong-dollar terms with positive income and price components. Consumer inflation eased to 1.4% from a four-month high of 2.0% year on year in February 2025, with lower food and transportation prices. Other key economic indicators remained mixed as manufacturing-related activities expanded, underpinned by increasing computer and electronics output. Retail sales slipped by 15% year on year in February 2025, led by food, alcoholic drinks and tobacco. The trade deficit narrowed as exports soared amid high demand for electronic machinery. As widely expected, the Hong Kong Monetary Authority maintained its base rate at 4.75%, in line with the US Federal Reserve.

Deflationary Pressures Emerge in China

China (USD unhedged: +0.1%): China’s 10-year government bond yield rose by four basis points, delivering -0.4% returns in Chinese-yuan terms. China indicated deflationary pressures at the consumer level as the inflation rate dropped by 0.7% year on year in February 2025, reversing the 0.5% rise in the previous month. Food prices fell by the most in 13 months, and there was a steep slowdown in healthcare and education costs. China’s new home prices in 70 cities dropped by 4.8% year on year in February 2025, marking the 20th consecutive monthly decrease. Other key economic indicators remained mixed as manufacturing-related activities expanded at a softer pace. China's retail sales rose by 4.0% year on year in January and February 2025, driven by higher consumption during the Spring Festivals. China’s trade surplus surged to USD 170.5 billion in February 2025. The sharp increase was primarily driven by an 8.4% year-on-year tumble in imports, while exports grew by 2.3%.

Indonesia’s Trade Surplus Surges

Indonesia (USD unhedged: -0.2%): Indonesia’s 10-year bond yield rose by nine basis points, posting an Indonesian rupiah return of -0.3%. Consumer inflation unexpectedly fell from 0.76% to -0.09% year on year in February 2025, missing forecasts of a 0.41% rise. This marked the first deflationary print since March 2000, with housing prices slumping by 12.08% due to the impact of 50% electricity discount tariffs in the first two months of 2025. Key economic indicators remained mixed as the manufacturing PMI survey expanded to an 11-month high in February 2025, as output and new orders were strong. Retail sales rose for the ninth consecutive month, and the trade surplus surged to USD 3.12 billion in February 2025, which was primarily driven by exports expanding at their fastest pace since January 2023. Bank Indonesia maintained its benchmark interest rate at 5.75% during its March 2025 policy meeting, aligning with market expectations. The central bank stated that the pause is to both ensure the stability of the rupiah amid heightened global uncertainty and support economic growth.

Labor Market Recovery and Positive Retail Sales

South Korea (USD unhedged: -0.7%): South Korea emerged as the weakest performer in the Markit iBoxx ABF Pan-Asia Index in March 2025. The 10-year South Korean-won bond yield rose by six basis points, delivering a -0.1% return. Consumer inflation slowed to 2.0% year on year in February 2025 from 2.2% in January 2025. Key economic indicators remained mixed as the manufacturing PMI survey contracted for the second consecutive month in February 2025 as output volumes fell and domestic demand remained stagnant. The unemployment rate stood at 2.7% in February 2025, suggesting a recovery in the labor market following last year’s brief disruption caused by the short-lived martial law attempt. Retail sales continued to contribute positively and South Korea's trade surplus increased to USD 5 billion in March 2025, driven by a rebound in semiconductor exports.

Footnotes

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