November 17, 2017 / 7:05 AM / a year ago

Asia Graphics-Foreign investors turn net sellers of Asian bonds in October

Nov 17 (Reuters) - Foreign investors turned net sellers of Asian bonds for the first time in the year in October as U.S. Treasury yields rose sharply in the month, reducing the appeal for regional bonds.

Data from central banks and local bond market associations in India, Indonesia, Thailand, Malaysia and South Korea showed foreigners net sold $1.7 billion in these bond markets in October.

With U.S. Federal Reserve set to hike interest rates for the third time in December, U.S. Treasury yields jumped last month on hopes of more hikes in the next year too, under a new Federal Reserve Chair.

Jerome Powell, nominated by U.S. President Donald Trump as the next Federal Reserve Chair, is widely expected to continue to raise interest rates gradually, as Yellen began to do in late 2015, and to shrink the central bank’s $4.5 trillion balance sheet. In October, foreigners sold about $1.75 billion of Indonesian bonds, paring their holdings for the first time since November 2016.

Foreigners also sold $656 million of Malaysian bonds last month.

Kenanga Investment bank said the outflows in Malaysian bonds were largely due to an estimated 12.2 billion ringgit worth of Malaysian government securities due for redemption in October.

“Generally, a large scheduled bond maturity would result in a net decline in foreign bond holding,” Kenanga said.

However, Indian bonds received inflows on the back of positive sentiment as India’s cabinet approved a $32.43 billion plan to recapitalise its state banks.

Reporting by Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vyas Mohan

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