Bloomberg reports that slowing demand for government bonds in Southeast Asia is opening opportunities for institutional investors to buy bonds at more attractive yields. Western Asset Management and Aberdeen Investments remain positive on the region, citing strong domestic demand and economic fundamentals, even as short-term markets are pressured by global bond yields, high oil prices, and heavy bond issuance. Thailand's auction of government bonds maturing in 2036 on September 2 drew a bid-to-cover ratio of just 1.13 times, the lowest for a 10-year benchmark bond since May. Malaysia's auction of bonds maturing in 2046 in late August drew a ratio of 1.63 times, the second-lowest this year. In the Philippines, last week's auction of 5-year bonds had the lowest bid-to-cover ratio since 2013, and Indonesia's regular government bond auction last week drew total bids of 66 trillion rupiah, or about 3.77 billion dollars, the lowest since the July 7 auction. Desmond Fu, head of investment management at Western Asset Management, said long-dated bonds remain exposed to term premium shocks in global markets and heavy issuance, so he favors short- to medium-dated bonds, and views weak-demand auctions as an opportunity to invest at higher yields. Feza Wibawa, investment manager at Aberdeen Investments, said the recent market weakness stems more from a tougher external environment than from any deterioration in Southeast Asian economic fundamentals, and remains positive on regional assets over the medium to long term. Thailand's August inflation rose 2.53% year on year, exceeding economists' expectations for the first time in four months, while Indonesia's inflation accelerated 3.19% year on year, also above market forecasts.
Abrdn PLCAberdeen Investments remains positive on Southeast Asian bonds, viewing weak-demand auctions as an opportunity to buy at higher yields.
Western Asset Management favors short- to medium-dated ASEAN bonds and views weak-demand auctions as an opportunity to invest at higher yields.
