EM Asia bonds have moved more in lockstep with Treasuries this quarter as the dollar tumbled, luring foreign investors to the region and boosting local currencies.
The sensitivity of emerging Asian bonds to Treasuries is climbing back toward its 2024 peak, with Malaysia’s debt set to be the biggest beneficiary.
The 30-day correlation between EM Asia bonds and 10-year US yields has risen to around 0.29 from zero at the end of June, close to the highest in seven months. Malaysian bonds have a correlation of 0.53 — the most in the region — suggesting they will gain more than their peers amid bets on Federal Reserve interest-rate cuts.
