Global bond flows compass Pockets of resilience

Research evidence excerpt

Global bond flows compass Pockets of resilience

Fixed Income ● Rates

26 June 2026

Emerging markets (EM): Even as inflation expectations have moderated on the back of lower

oil prices, EM rates are facing a fresh headwind from a stronger US dollar (FX forecast update,

18 June). With Fed Chair Warsh’s unambiguous commitment to the inflation mandate, we see a

greater likelihood for higher US rates alongside a stronger dollar (US Rates: Warsh and peace,

24 June). That combination typically tightens global financial conditions, increases the beta of

EM portfolio flows to US moves, and compresses the relative return of EM bonds versus the

US. Against that backdrop, non-resident flows have turned broadly softer across most EM

markets. Notable exceptions remain Korea, Indonesia, India, and Hungary, where foreign

inflows have been positive and, in some cases, accelerating. This week’s continued inflows into

these markets appear to be driven more by idiosyncratic support such as central bank

stabilisation measures, rather than by a broad-based improvement in the global EM flow picture.

We expect foreign demand for EM bonds to remain primarily shaped by sensitivity to US rates

and the durability of local policy backstops.

Higher frequency flow data in Table 1 shows that, over the latest reported week in June, non-

resident investors net purchased USD1.5bn of Korean Treasury Bonds in the secondary

market. Government debt inflows were also seen in Indonesia (USD323m) and India

(USD1.5bn). Foreign bond holdings, however, declined in Thailand (USD88m) and the

Philippines (USD119m, includes Corp). In CEEMEA, non-resident investors increased their

holdings of Hungary government debt by USD1.7bn. In LatAm, Mexico government debt saw

USD1.5bn of outflows.