Asian local currency bonds were flat on Thursday and on course to end 2009 with huge gains, with the outlook for next year clouded by expected interest rate increases and rising deficits next year.
Trade was extremely quiet with many centers in Asia such as Thailand, Philippines and Indonesia on holiday and many banks thinly staffed ahead of the New Year weekend. Among the few markets open, Malaysian government bonds were largely steady with the five-year benchmark yield at 3.79 percent compared to Wednesday's close of 3.78 percent, according to OSK Investment Bank.
Bonds in most Asian markets have posted equity-like returns this year as central banks slashed rates and flooded money markets with cash to help economies weather the devastating global financial crisis. Indonesia's local currency bonds have been the best performer in Asian with a year-to-date return of 22 percent followed by Philippines with 8 percent and South Korea with 2 percent, according to HSBC's bond series indices.
Latest data showed foreign buying in Indonesian bonds hit a new record of 108.36 trillion rupiah ($11 billion) in the week to December 29. For the year they have bought nearly 21 trillion rupiah of debt and now own roughly 19 percent of total outstanding debt.