Asian bond outflows ease in July as U.S. trade deals soothe investor nerves

By Gaurav Dogra

Aug 15 (Reuters) - Foreign outflows from Asian bonds significantly eased in July as investor sentiment improved following U.S. trade agreements with key partners, easing fears of escalating trade tensions.

Cross-border investors sold just a net $806 million worth of regional bonds in July, nearly a 62% decline from $2.1 billion net sales the prior month, data from regulatory authorities and bond market associations in India, Indonesia, Thailand, Malaysia and South Korea showed.

"With more clarity on tariffs now, portfolio flows will react more to Fed policy outlook and how the region’s exports and growth are evolving," said Khoon Goh, head of Asia research at ANZ.

Foreign net outflows from Indonesian bonds were at nearly $1.6 billion last month, compared with $1.9 billion net sales the prior month.

U.S. President Donald Trump agreed to impose 19% tariffs on Indonesian imports in late July, down from a threat of 32% duties. A similar 19% tariff was imposed on Malaysian goods in early August.

Malaysian bonds witnessed a second successive monthly outflow to the tune of $1.3 billion in July.

Foreign net sales in Thai and Indian bonds stood at $38 million and $25 million, compared with $883 million and $717 million, respectively, in June.

Trump last week imposed an additional 25% tariff on Indian goods, bringing duties on some Indian exports to as high as 50%, citing New Delhi's continued imports of Russian oil.

South Korean bonds, meanwhile, bucked the trend with a net $2.16 billion in monthly foreign purchases, the sixth monthly inflow in a row, continuing to benefit from their upcoming inclusion in the FTSE World Government Bond Index (WGBI) in November 2025.

"For investors looking to diversify their USD assets, Asia local currency bonds offer attractive real yields and potential currency upside," said Rong Ren Goh, portfolio manager at Eastspring Investments.

"The region’s expected rate cuts should also help to underpin local bond markets."