Improved outlook boosts bond marts
The improving global economic outlook and progress on Covid-19 vaccinations have boosted bond yields in emerging East Asian economies, said the Asian Development Bank (ADB).
Its latest Asia Bond Monitor report showed that investor sentiment and financial conditions had improved, with the regional local currency bond markets having expanded to US$20.1 trillion last year.
“Bond markets in emerging East Asia are continuing to grow, mobilising funding for the region’s sustainable recovery from the Covid-19 pandemic,” said ADB chief economist Yasuyuki Sawada yesterday.
He added that the successful vaccination campaigns, accommodative monetary policy stances and easing of restrictions had spurred economic activity.
However, it noted that the uncertainty over the pandemic’s trajectory continued to weigh on the region’s outlook.
ADB said the uneven access to Covid-19 vaccines and a potential adjustment in asset prices due to an escalation of long-term interest rates also posed risks.
Government bond yields in most advanced economies and emerging East Asian markets increased between Dec 31 last year and Feb 15, while the improving sentiment boosted most equity markets and regional currencies.
Government bonds dominated the region’s bond stock at US$12.4 trillion as of end-December, while corporate bonds amounted to US$7.7 trillion.
China remained the region’s largest bond market, accounting for 77.4 per cent of emerging East Asia’s total bond stock.
Capital flows into the region’s equity and bond markets recovered in the final quarter of last year, said ADB, with the bond market growing to the equivalent of 97.7 per cent of the region’s gross domestic product.
Emerging East Asia comprises Hong Kong, China, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.