Strategists say that US Treasury yields have surged, pushing the yield gap between US Treasuries and Asian emerging market bonds close to historic extremes, raising the risk of regional capital outflows.

Driven by strong economic data and weak auction demand, the US 10-year Treasury yield rose 16 basis points on Wednesday to 5.11%, the highest since 2007.

The yield discount of Malaysia's 10-year government bonds relative to US Treasuries widened to its largest level since 2007, while similar spreads for Indonesia and Thailand also approached historic lows.

Qiu Shiming, chief emerging market FX strategist at Intelligence, said: "Long-duration Asian emerging market bonds are particularly hit by rising US Treasury yields, especially in low-yield markets like South Korea and Thailand."

Higher US Treasury yields could "prompt foreign capital to flow out of regional bond markets, or reduce the scale of net foreign inflows."

For Asian emerging markets, widening spreads and potential capital outflows could trigger a series of consequences, including pressure on local currencies.

Regional central banks may be forced to maintain higher domestic interest rates to defend their currencies, thereby raising financing costs.

In contrast, bond yields in Malaysia and Thailand rose only modestly by 5 basis points on Thursday.

Thanks to stable domestic inflation and relatively resilient currencies, bonds in these two countries did not experience the large-scale selloff seen in US Treasuries.

This week, the discount of Malaysia's 10-year government bonds relative to US Treasuries widened to 122 basis points, the highest since 2007; the equivalent spread for Thailand's 10-year government bonds reached 290 basis points, approaching historic lows.

Earlier this month, the spread of Indonesian government bonds relative to US Treasuries narrowed to 196 basis points, close to a historic low.

Li Haomin, senior macro strategist at Lombard Odier in Singapore, said: "The continued rise in US Treasury yields creates an unfavorable environment for bond investors. But it also demonstrates the resilience of Asian dollar bond and local currency bond markets, with the exception of markets with weaker risk resistance such as Indonesia and the Philippines."