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Foreigners buy Asian bonds for sixth straight month in October

(Reuters) - Foreigners were net buyers of Asian bonds for a sixth straight month as hopes of an interim U.S.-China trade deal improved risk sentiment and benefited the highest-yielding bonds in the region.

Bonds received a combined net inflow of $2.14 billion last month, the highest since July, according to data from regional banks and bond market associations in Indonesia, Malaysia, Thailand, South Korea and India.

Graphic: Foreign flows into Asian bonds

Overseas investors purchased $2.07 billion worth of Indonesian bonds in October, which was the highest in four months. Indian bonds attracted $518 million in inflows.

“This implies that the global search for yield remains robust. The two markets are also expected to make further interest rate cuts,” said Khoon Goh, head of Asia research at ANZ in Singapore.

Bank Indonesia cut interest rates for the fourth time in four months in October.

Anticipation of more reforms from Indian Prime Minister Narendra Modi’s government, after its corporate tax cut in September, lifted flows into Indian bonds, analysts said.

South Korea, Thailand and Malaysian bonds saw net outflows in the past month.

Expectations for phase one of a trade agreement between China and the Unites States helped bond flows last month, but lack of progress on an agreement has raised doubts about whether a trade deal will take place at all.

“Investors will want to see the formal signing of the phase one deal and signs of continued improvement in economic activity before they make further fund injections,” ANZ’s Goh said.

Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; editing by Larry King