Asia Bond Monitor - March 2015
The Asia Bond Monitor reviews recent developments in East Asian local currency bond markets along with the outlook, risks, and policy options. This issue includes a special section on Oil and Gas Companies’ Bonds in Asia.
- US$21.00 (hardcopy)
Local currency (LCY) bond markets in emerging East Asia started the year well despite uncertainties over the Greek debt crisis and the end of quantitative easing in the United States (US). Bond yields in most emerging East Asian economies were pushed down by a reduction in inflationary expectations amid a fall in oil prices.
Most of the region’s currencies weakened against the US dollar between end-December 2014 and mid-February 2015. The decline was led by the Indonesian rupiah and Malaysian ringgit as the oil and gas sectors in these economies are adversely affected by lower global oil prices. Credit default swaps (CDSs) in the region have remained relatively stable, reflecting continued investor confidence, while CDSs in the Eurozone are rising amid concerns over the possibility of Greece leaving the monetary union.
Bond yield trends in advanced economies were mixed, due to divergent monetary policies between the US on one hand and the Eurozone and Japan on the other, between end-December 2014 and mid-February 2015. At the same time, risk premiums decreased in all emerging East Asian economies except Malaysia.
Tighter US monetary policy could signal increasing risks to emerging East Asia’s LCY bond markets: (i) credit spreads might widen ahead of the US Federal Reserve raising interest rates, (ii) the stronger US dollar is making it more costly to service foreign currency debts, and (iii) falling oil prices might hurt highly-leveraged oil and gas companies in the region.
Special Section: Oil and Gas Companies’ Bonds in Asia
Bond issuance from the region’s oil and gas industry has expanded for much of the past decade, peaking at $118 billion in 2012 before slowing to $63 billion in 2014. Despite the recent decline in bond issuance volumes, the share of FCY-denominated debt within the industry increased to a record 66% in 2014. The proportion of oil and gas corporate bonds to total bonds outstanding is generally small across Asia, except in Kazakhstan where the ratio stands at 20.2%
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.
- Global and Regional Market Developments
- Bond Market Developments in the Fourth Quarter of 2014
- Policy and Regulatory Developments
- Oil and Gas Corporate Bonds in Asia
- Market Summaries
- People’s Republic of China
- Hong Kong, China
- Republic of Korea
- Viet Nam