The trend results from the mounting fiscal burden on governments in a region heavily exposed to energy imports, with authorities handing out fuel subsidies to cushion the blow of surging prices. Concerns about extra funding needs, as well as the recent global bond sell-off due to a worsening inflation picture, has dampened investor appetite for long-dated sovereign debt in those markets.
(May 22): The yield gap between short- and long-dated bonds in several Southeast Asian countries may widen further, as elevated oil prices increase inflationary pressures and deepen fiscal strains.
The gap between two- and 10-year government bond yields swelled to its widest in over three years in both Thailand and the Philippines this month. A key part of the Malaysian yield curve has also steepened since the Iran war began.
