Asia Bond Monitor - March 2016
Bond yields in most emerging East Asian markets declined amid mounting gloom over global growth prospects. The main exceptions to the downward trend were the People’s Republic of China (PRC) and Hong Kong, China.
Yields of local currency bonds in most emerging East Asian markets remained on a downward trajectory in the first month and a half of 2016, pressured by worries over global growth prospects and lackluster economic performances in industrialized economies.
Bond yields in most emerging East Asian markets declined between the start of the year and mid-February amid mounting gloom over global growth prospects. The main exceptions to the downward trend were the People’s Republic of China (PRC) and Hong Kong, China. Bond yields also fell in major advanced economies due to subdued inflation and concerns over deflation in some economies.
Yields for 10-year local currency (LCY) government bonds in emerging East Asia mostly fell between 1 January and 15 February. Over the same period, most emerging East Asian stock markets also fell, with the only exceptions being in Indonesia, where the market rose, and in Thailand, where the market held steady.
Risks to emerging East Asia’s bond markets have intensified since the start of the year. The Federal Reserve may raise interest rates within the first half of the year, which could generate outflows from the region’s bond markets. However, a gradual and cautious increase in interest rates, combined with emerging East Asian bond markets having already factored in US monetary policy normalization, suggest that the adverse impacts will be limited. At the same time, the strengthening US dollar could adversely affect corporate balance sheets and exacerbate funding challenges for companies that have borrowed in US dollars. A broader loss of investor confidence in emerging markets looms as the single biggest risk.
About the publication
The Asia Bond Monitor 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 2015
- Policy and Regulatory Developments
- Market Summaries
- People’s Republic of China
- Hong Kong, China
- Republic of Korea
- Viet Nam