Global funds see any rise in Treasury 10-year yields toward 5% spurring outflows from emerging Asian bonds, as higher rates in the US will prompt investors to favor dollar assets over regional debt. The benchmark 10-year yield touched a 19-month high of 4.75% earlier this week, raising alarms among market participants.

Investors will be gauging the impact of US Treasury Secretary Scott Bessent's plan to increase buyback of US bonds, which triggered a pullback in yields. The buyback strategy aims to improve market liquidity but its effectiveness remains uncertain as yields hover near critical thresholds.

Concerns arose as key Asian bond markets suffered a cumulative three-month outflow the last time US benchmark yields approached 5% in October 2023, a bout of foreign selling that hasn't been matched since. That episode saw sustained capital flight from the region, and investors fear a repeat if yields breach the psychological 5% barrier again. Regional central banks are closely monitoring the situation, with some considering intervention to stabilize their bond markets.