Asian bonds secured their biggest monthly foreign inflows in thirteen months in March on hopes that major central banks would end their rate-hike cycle soon to boost the economies from a slowdown.
Foreigners purchased a net $4.52 billion worth of bonds in India, Indonesia, Malaysia, South Korea and Thailand, marking their biggest monthly net purchase since February 2022, data from regulatory authorities and bond market associations showed.
They received $2.7 billion in the first quarter of the year, their first quarterly inflow in a year.
"The market abruptly repriced the degree to which the Fed would hike rates after banking sector worries," said Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management.
"That, I think, fed into the narrative that where else are you getting cheap currencies, good real yields? And that's where Asia angle clearly comes up."
South Korean bonds drew a net $2.35 billion worth of foreign inflow, the biggest in eight months on bets that the Bank of Korea would cut the interest rates later this year and on hopes of South Korean bonds' inclusion in FTSE's bond indexes.
Malaysian, Indonesian and Thai bonds also obtained $1.5 billion, $700 million and $283 million worth of inflows, respectively.
Meanwhile, investors sold a net $307 million worth of Indian bonds after two months of buying in a row on concerns over the absence of an extension for the concessional withholding tax rate.
The government did not extend the concessional tax rate of 5% on income from rupee-denominated bonds, which were making investments in the country more attractive. Ending this treatment would require them to pay a 20% tax on interest income from July 1.
Barclays expects foreign demand for Indian bonds to stay weak in the short term.
" A range-bound market, no progress on index inclusion, and potential upcoming changes to FPI taxes will likely continue to weigh on investor demand," it said.