(Bloomberg) -- Global funds seeking to ride out the recent volatility in financial markets have gravitated to an unlikely asset class: emerging Asian bonds.

Overseas investors poured the most money into South Korean bonds in eight months last week, while inflows into Indonesian notes were the strongest since January. Foreign funds also scooped up Thai and Indian securities during the period.

The biggest swings in Treasury yields in more than a decade have sparked a search for alternative havens as investors attempt to weather the fallout from the global banking crisis. Resilient currencies and signs of a peak in inflation may have helped provide ballast for developing Asian bonds amid the turmoil.

“Emerging Asia bonds provide a temporary refuge as they are relatively calm and better shielded at this juncture,” said Winson Phoon, head of fixed-income research at Maybank Securities Pte in Singapore. “They are also better insulated from the fallout arising from rising credit risk in the region, unless the banking crisis deteriorates and global funding conditions tighten.”

Developing Asian debt outperformed most of its global peers last week as it gained 1.4%, boosting its appeal among money managers. In contrast, notes from Europe, the Middle East and Africa lost 1%, while Latin American securities declined almost 2%.

The average cost of five-year debt protection for emerging Asian economies is around 82 basis points, compared with 139 basis points for global developing markets.

Read More: Abrdn Ditches Some Treasuries in Favor of Cheaper Asia Debt 

Emerging Asian currencies have held up relatively well in recent days, helping to keep bond yields anchored. Thailand’s baht, South Korea’s won and the Taiwan dollar topped the leaderboard of 23 emerging currencies last week.

The outperformance may have been due to relatively light positioning among real-money investors in the developing Asian currency space, Morgan Stanley strategists including Min Dai wrote in a research note. 

Economic fundamentals also appear to favor emerging Asian debt. From South Korea and the Philippines to Thailand and China, regional economies’ February headline inflation figures trailed economists’ estimates, suggesting price pressures may have peaked. Singapore inflation came in below estimates on Thursday, lowering the odds of tightening from the Monetary Authority of Singapore in April. 

Average inflation in Asia is low, relative to Latin America as well as Central Europe, Middle East and Africa, Goldman Sachs Group Inc. economists including Andrew Tilton wrote in a note. In addition, Asia’s growth is strong compared to global emerging peers, thanks to the reversal of China’s Covid curbs, they said.

(Updates pricing in paragraph six and Singapore inflation in second to last paragraph.)

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