Insights

Asian bonds vary as Indonesia rises and Thailand lags

In October 2025, the iBoxx ABF Pan-Asia Bond Index delivered mixed but ultimately negative returns, with the US-dollar-unhedged version declining by 0.27% and the hedged version gaining 0.18%. A broad depreciation of Asian currencies against the US dollar further weighed on performance, detracting by an additional 0.44%.

December 2, 2025

State Street Investment Management Fixed Income Portfolio Strategists

Asian 10-year bond yields fell by an average of seven basis points during the month. Indonesia saw a significant decline of 29 basis points, while Thailand experienced an increase of 28 basis points. Monetary policy across the region remained broadly accommodative: the Philippines reduced its policy rate by 25 basis points to 4.75%, and Hong Kong lowered its base rate by 25 basis points to 4.25%. Meanwhile, central banks in China, Thailand, Indonesia, Malaysia, and South Korea kept rates unchanged at their October 2025 policy meetings.

Market	Local Currency Bond Return	FX Return	Total Return (in USD)
Indonesia	2.1%	0.4%	2.5%
China	0.7%	0.1%	0.8%
Hong Kong	0.4%	0.1%	0.5%
Malaysia	-0.2%	0.5%	0.4%
Philippines	1.0%	-1.1%	-0.1%
Singapore	0.1%	-0.8%	-0.7%
Thailand	-2.5%	0.0%	-2.5%
Korea	-1.1%	-1.5%	-2.6%

Bank Indonesia maintains a steady position

Indonesia (USD Unhedged: +2.5%)
Indonesia’s 10-year government bond yield declined by 29 basis points in October 2025, while Indonesian rupiah returns were +0.4%. Headline inflation rose to 2.86% year on year in October 2025, up from 2.65% in September 2025 – its highest level since April 2024 – yet remained within Bank Indonesia’s target range of 2.5% ± 1%. Core inflation also increased to 2.36% year on year in October 2025, compared to 2.19% in the previous month. The S&P Global Indonesia Manufacturing Purchasing Managers’ Index (PMI) survey improved to 51.2 in October 2025 from 50.4 in September 2025, signaling renewed expansion driven by stronger domestic demand. At its October 2025 policy meeting, Bank Indonesia maintained the benchmark interest rate at 4.75%, the deposit facility at 3.75%, and the lending facility at 5.50%. These decisions reflected expectations of well-contained inflation, concerns about Indonesian rupiah stability, and the continuation of supportive policies.

A fragile recovery with ongoing challenges

China (USD Unhedged: +0.8%)
China’s 10-year government bond yield declined by seven basis points in October 2025, while the two-year yield fell by five basis points. Currency returns were +0.1% in October 2025. In China, deflationary pressures showed signs of easing, as inflation edged back into positive territory, with the consumer price index rising by 0.2% year on year and the producer price index declining at a slower pace. However, fixed-asset investment contracted by 0.5% from January 2025 to September 2025, driven by a deep property slump despite modest gains in infrastructure and manufacturing. At its October 2025 policy meeting, the People’s Bank of China kept key lending rates unchanged at record lows and resumed sovereign bond purchases to stabilize markets. The government introduced fiscal measures, including 500 billion yuan in new policy-based financial instruments and 200 billion yuan in special local government bonds to bolster investment. On the economic front, manufacturing momentum weakened as the RatingDog China General Manufacturing PMI survey slipped to 50.6, while services activity exceeded market expectations. Trade performance softened, with exports down 1.1% year on year and imports rising by about 1.0%. Urban unemployment held steady at 5.2%, though youth joblessness remained elevated. Overall, October 2025 reflected a cautious recovery, with persistent structural headwinds in manufacturing, real estate, and external demand continuing to weigh on China’s growth prospects.

Improving growth in Hong Kong

Hong Kong (USD Unhedged: +0.5%)
In October 2025, Hong Kong’s 10-year government bond yield declined by around seven basis points, while the Hong Kong dollar added 0.1% to unhedged returns. Consumer prices rose marginally, with inflation remaining at 1.1% year on year, and the seasonally adjusted unemployment rate edged up to 3.9% for the July 2025 to September 2025 period. Economic growth accelerated, with gross domestic product (GDP) growth expanding by 3.8% year on year in the third quarter of 2025, supported by stronger exports and robust domestic demand. In response to global monetary easing, the Hong Kong Monetary Authority lowered its base rate by 25 basis points to 4.25% at the end of October 2025.

Malaysia’s economic expansion gathers pace

Malaysia (USD Unhedged: +0.4%)
Malaysia’s 10-year government bond yield rose by about five basis points in October 2025, while the Malaysian ringgit appreciated slightly, contributing 0.5% during the month. The economy expanded by 5.2% year on year in the third quarter of 2025, accelerating from 4.4% growth in the second quarter and marking the fastest expansion in a year, according to preliminary estimates. Inflation increased to 1.5% in September 2025, supported by easing global commodity prices and stable domestic conditions. The unemployment rate remained steady at 3.0%, reflecting five consecutive months of stability. Bank Negara Malaysia kept the overnight policy rate unchanged at 2.75%, signaling a neutral stance amid balanced growth and inflation dynamics.

Lower borrowing costs in the Philippines

Philippines (USD Unhedged: -0.1%)
The Philippines’ 10-year government bond yield declined by seven basis points in October 2025, while the Philippine peso depreciated, contributing -1.1% and resulting in negative US-dollar-unhedged returns. GDP growth eased to around 4.0% year on year in the third quarter of 2025, reflecting slower infrastructure spending, while the International Monetary Fund projects full-year growth of around 5.4%. Inflation remained at 1.7%, driven by higher food and utility costs, though core inflation softened to 2.5%. Unemployment remained stable at 3.8% in September 2025, while underemployment improved. Bangko Sentral ng Pilipinas cut its policy rate by 25 basis points to 4.75%, citing benign inflation and anchored expectations.

Weighing domestic inflation with global developments

Singapore (USD Unhedged: -0.7%)
Singapore’s 10-year government bond yield remained unchanged in October 2025, while the Singapore dollar depreciated, contributing -0.8%. Headline inflation rose slightly to 0.7% year on year in September 2025, and core inflation firmed to 0.4%, signaling persistent price pressures despite an overall disinflationary trend. The unemployment rate held steady at 2.0% in the third quarter of 2025, supported by continued job creation, though global uncertainties remain a drag on hiring sentiment. The Manufacturing PMI survey eased marginally to 50.0 in October 2025 from 50.1 in September 2025, indicating flat factory activity amid softer electronics demand. The Monetary Authority of Singapore maintained its policy stance at the October 2025 review, keeping the Singapore Dollar Nominal Effective Exchange Rate Index (S$NEER) band unchanged as policymakers balanced subdued inflation with external risks, including tariff pressures and slowing global growth.

Rates on hold in Thailand

Thailand (USD Unhedged: -2.5%)
Thailand’s 10-year government bond yield rose by 28 basis points in October 2025, while headline consumer prices fell by 0.76% year on year, marking seven straight months of deflation. The core consumer price index slowed to 0.61%, its weakest pace in over a year. The unemployment rate edged up to 0.91% in the second quarter of 2025, and the Manufacturing PMI survey surged to 56.6 – the highest since May 2023 – on strong orders, output, and sentiment. On 8 October 2025, the Bank of Thailand kept its policy rate at 1.50% (5–2 vote), resisting calls for a cut, though a reduction toward 1.25% is expected in December 2025.

Stronger momentum and rising prices

South Korea (USD Unhedged: -2.6%)
South Korea’s 10-year government bond yield rose by 11 basis points in October 2025, while the Korean won depreciated, contributing -1.5%. Headline inflation accelerated to 2.4% year on year – up from 2.1% in September 2025 – with core inflation at 2.5%, driven by higher food, energy, services, and seasonal factors. The labor market softened modestly as unemployment edged up to 2.6%, with youth and manufacturing employment declining, though total jobs increased by about 193,000. Still, growth momentum strengthened: GDP for the third quarter of 2025 rose by 1.7% year on year (1.2% quarter on quarter), and the PMI survey indicated recovery amid gains in exports and domestic demand.

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