In August, Asian bonds experienced their first monthly foreign inflow in three months, driven by expectations of U.S. Federal Reserve rate cuts aimed at supporting a cooling labor market. This development has heightened demand for higher-yielding emerging markets. According to data from regulatory authorities and bond market associations in India, Indonesia, Thailand, Malaysia, and South Korea, non-native investors purchased Asian bonds worth a net $311 million last month, marking the first monthly net purchase since May. The Fed reduced interest rates for the first time since December, citing increasing risks to the labor market and signaling further rate reductions as unemployment rises, work hours shrink, and other signs of economic weakness emerge. Khoon Goh, head of Asia research at ANZ, anticipates a cumulative rate cut of 125 basis points, bringing the Fed funds rate to 3.25% by March 2026. Goh also noted that a more accommodative U.S. monetary policy stance should bolster currencies and asset markets in Asia, excluding China. Last month, investors bought Indian bonds worth $773 million and Malaysian debt instruments worth $721 million, ending a two-month selling trend in both markets. However, South Korean, Indonesian, and Thai bonds saw foreign outflows of $447 million, $400 million, and $337 million, respectively.