Asia Bond Monitor - June 2015

Emerging East Asia’s bond markets were volatile due to rising global concerns over the unresolved Greek debt crisis and possibility of an interest rate hike in the United States (US). Global interest rates, which had been falling up until April, started picking up in early May. Contributing factors to the recent increases include protracted negotiations over the Greek debt crisis, firmer oil prices, improving economic indicators in the US in April–May, and faster first quarter of 2015 (1Q15) GDP growth in the eurozone. As a result, the region’s bond yields have also moved upward since the beginning of May.

The local currency bond market in emerging East Asia continued to expand in 1Q15 to reach US$8.3 trillion at end-March. Growth, however, moderated on both a quarter-on-quarter and year-on-year basis.

The three largest bond markets in the region were those of the People’s Republic of China (PRC), the Republic of Korea, and Malaysia. The PRC led the region in terms of size for both government and corporate bonds. Malaysia is home to the largest sukuk (Islamic bond) market in the region, with more than half of its local currency bond stock comprising sukuk at end-March.

Special Section: Bond Financing for Renewable Energy

Multilateral development banks, governments, and the private sector are potential financiers for renewable energy projects. However, the public sector can only meet a small portion of the financing needs.

Given the large pool of investable funds in Asia, the growing appeal of developing economies as an investment destination, and heightened interest in renewable energy investments, bond financing is becoming increasingly popular.

Green bonds have also taken off in recent years, supported by growing investor interest in adhering to environmental, social, and governance criteria.

About the Asia Bond Monitor

This publication reviews recent developments in East Asian local currency bond markets along with the outlook, risks, and policy options. It covers the 10 members of the Association of Southeast Asian Nations plus the People’s Republic of China; Hong Kong, China; and the Republic of Korea.