Everand Logo

Welcome to Everand!

  • Discover millions of ebooks, audiobooks, and so much more with a free trial

    From $11.99/month after trial. Cancel anytime.

    Asia Bond Monitor: September 2011
    Asia Bond Monitor: September 2011
    Asia Bond Monitor: September 2011
    Ebook195 pages1 hour

    Asia Bond Monitor: September 2011

    By Asian Development Bank

    ()

    Read preview

    About this ebook

    The Asia Bond Monitor (ABM) reviews recent developments in East Asian local currency bond markets along with the outlook, risks, and policy options. The ABM covers the 10 Association of Southeast Asian Nations member countries plus the People's Republic of China; Hong Kong, China; and the Republic of Korea.
    LanguageEnglish
    PublisherAsian Development Bank
    Release dateSep 1, 2011
    ISBN9789290924272
    Asia Bond Monitor: September 2011

    Read more from Asian Development Bank

    Related to Asia Bond Monitor

    Related ebooks

    Business For You

    View More
    View More

    Related podcast episodes

    Related articles

    • UNLIMITED

      China’s Treasury Bonds Lure International Capital

      Nov 19, 2020

      China’s Ministry of Finance (MOF) issued $6 billion worth of sovereign bonds into Hong Kong Special Administrative Region on October 14, with subscriptions by international investors reaching 4.7 times the volume issued by the time the dollar-denomin

      3 min read

    • UNLIMITED

      China Cites 'Flexible' Yuan Exchange Rate, Healthy Economy As Buffer Against US Tapering

      Oct 22, 2021

      China's advanced economy and the flexibility of its yuan exchange rate leave it well placed to absorb shocks from policy tightening by the US Federal Reserve, including hot money flows out of the country, the nation's currency regulator has said. The

      3 min read

    • UNLIMITED

      Why Investors Should Look to Emerging Markets

      Jan 1, 2021

      THE COVID-19 PANDEMIC has triggered the deepest economic downturn in Canada since World War II. GDP dropped at an annualized rate of 38.7 per cent between April and June of 2020 — the worst on record since 1961. While federal fiscal policies remain s

      7 min read

    • UNLIMITED

      China's Yuan: How Far Will Beijing Go To Support Its Currency After Slide To 16-year Low Against The US Dollar?

      Sep 9, 2023

      China's yuan plunged to a 16-year low against the US dollar amid a narrowing decline of exports in August. The recovery of the world's second-largest economy has slowed as the manufacturing sector has struggled to pick up. The yuan has lost 6.3 per c

      3 min read

    • UNLIMITED

      How to Navigate Investing in Emerging Markets

      Oct 4, 2018

      If you've been investing in emerging-markets stocks, you probably have a bad case of whiplash. After a rip-roaring run in 2017, the MSCI Emerging Markets index fell 17.7% from its peak in late January 2018 through mid September. "There's certainly a

      4 min read

    • UNLIMITED

      Forex Reserves as Ballast

      Feb 23, 2023

      According to the State Administration of Foreign Exchange, by the end of January, China’s foreign exchange (forex) reserves had hit $3.18 trillion, up by $56.8 billion, or 1.82 percent, over the end of 2022, the fourth monthly hike in a row. Last yea

      2 min read

    • UNLIMITED

      An Unpleasant Consensus

      Aug 5, 2022

      An Unpleasant Consensus
      7 min read

    • UNLIMITED

      Emerging Markets … And Trends

      Nov 26, 2020

      Emerging Markets … And Trends
      9 min read

    • UNLIMITED

      Look Before You Leap

      Nov 29, 2024

      Look Before You Leap
      5 min read

    • UNLIMITED

      From The Editor...

      Apr 12, 2024

      From The Editor...
      2 min read

    • UNLIMITED

      3rd Quarter Brings Bumper Rewards For SA Investors

      Oct 26, 2024

      The third quarter of 2024, to the end of September, produced bumper returns for South African investors, with the JSE having its strongest third quarter in 11 years and local bonds also performing strongly. Returns from global equities and bonds, how

      3 min read

    • UNLIMITED

      3rd Quarter Brings Bumper Rewards For SA Investors

      Oct 26, 2024

      The third quarter of 2024, to the end of September, produced bumper returns for South African investors, with the JSE having its strongest third quarter in 11 years and local bonds also performing strongly. Returns from global equities and bonds, how

      3 min read

    • UNLIMITED

      Run by Numbers SA Reserve Bank’s Financial Stability Review: Idiosyncratic factors amplify risks

      Jun 3, 2023

      The bond premium (Spread values) between the bonds of the two currencies are as depicted in the graphic for the various maturity terms. The market is King and if the above is the spread each individual investor must make their own decision. I for wha

      3 min read

    • UNLIMITED

      Run by Numbers SA Reserve Bank’s Financial Stability Review: Idiosyncratic factors amplify risks

      Jun 3, 2023

      The bond premium (Spread values) between the bonds of the two currencies are as depicted in the graphic for the various maturity terms. The market is King and if the above is the spread each individual investor must make their own decision. I for wha

      3 min read

    • UNLIMITED

      Run by Numbers SA Reserve Bank’s Financial Stability Review: Idiosyncratic factors amplify risks

      Jun 3, 2023

      The bond premium (Spread values) between the bonds of the two currencies are as depicted in the graphic for the various maturity terms. The market is King and if the above is the spread each individual investor must make their own decision. I for wha

      3 min read

    • UNLIMITED

      Finding Financial Stocks Amid The Fears

      Jun 25, 2021

      the US-dollar-based and award-winning Denker Global Financial Fund, managed by Kokkie Kooyman, returned a phenomenal 77.7% during the 12 past months to the end of May 2021, well ahead of the MSCI World Financial Index’s return of 62.5%. Naturally, at

      3 min read

    • UNLIMITED

      Government Bonds Under Fire

      Oct 14, 2023

      Government Bonds Under Fire
      4 min read

    • UNLIMITED

      Government Bonds - Under Fire

      Oct 14, 2023

      Government Bonds - Under Fire
      4 min read

    • UNLIMITED

      Government Bonds - Under Fire

      Oct 14, 2023

      Government Bonds - Under Fire
      4 min read

    • UNLIMITED

      Indian Resilience

      May 13, 2022

      Indian Resilience
      5 min read

    • UNLIMITED

      High Growth Will Be A Tough Ask

      Jan 14, 2023

      The consensus narrative on the Indian economy is that it is recovering strongly despite an unprecedented confluence of global headwinds, namely Russia’s war and the associated surge in global commodity prices, the sharp slowdown in China, and the agg

      4 min read

    • UNLIMITED

      Monetary Issues

      Dec 6, 2019

      Monetary Issues
      4 min read

    • UNLIMITED

      Taking Stock Of The Market

      Mar 23, 2023

      Brendan Ahern is chief investment officer at KraneShares, a U.S. exchange-traded fund (ETF) provider. He is an expert in global financial markets with a particular focus on China and actively maintains daily contact with an extensive local research n

      4 min read

    • UNLIMITED

      Safe Haven for International Capital

      May 6, 2021

      Battered by the COVID-19 pandemic since March 2020, the world’s major economies have adopted looser monetary policies as well as expansionary fiscal policies. The combined impact of the epi-demic and these stimulus policies have initiated big swings

      2 min read

    Related categories

    Reviews for Asia Bond Monitor

    0 ratings

    0 ratings0 reviews

    What did you think?

    Tap to rate

    Review must be at least 10 words

      Book preview

      Asia Bond Monitor - Asian Development Bank

      Emerging East Asian

      Local Currency Bond

      Markets:

      A Regional Update

      Highlights

      •The external environment facing emerging East Asia is bleak.¹ Market turbulence has prompted safe haven flows into gold, long-dated bonds, and higher quality corporate papers. The unresolved sovereign debt issues in the United States (US) and the ongoing eurozone debt crisis have led investors to re-think definitions of risk-free and risky assets.

      •Rising inflationary pressures in the first half of 2011 led to a steady stream of policy rate hikes across the region. However, the monetary policy stance in most markets could become more neutral as authorities in the region move to cushion against any anticipated slowdown in mature markets.

      •Capital flows into emerging East Asian bond markets remain strong as investors chase yields. Relatively strong economic fundamentals, interest rate differentials, and the potential appreciation of regional currencies are all key pull factors.

      •There has been a bullish flattening of government bond yield curves in most markets. Yields dropped sharply after the recent downgrade by Standard and Poor’s (S&P) of its sovereign rating for the United States to AA+ from AAA.

      •Total local currency (LCY) bonds in emerging East Asia grew 7.7% on a year-on-year (y-o-y) basis in 2Q11—and 2.4% on a quarter-on-quarter (q-o-q) basis—to US$5.5 trillion, driven more by the y-o-y growth rate for corporate bonds (19.6%) than for government bonds (2.7%).

      •The most rapidly growing bond markets in 2Q11 were Viet Nam, Singapore, and Malaysia, whose LCY bond markets expanded 5.0%, 4.3%, and 3.7% q-o-q, respectively. The People’s Republic of China’s (PRC) market grew 2.7% q-o-q in 2Q11, reflecting a modest 1.6% increase in its government bond sector, almost the same as for the region-wide government bond market.

      •Governments in three emerging East Asian economies—Hong Kong, China; the Republic of Korea; and Thailand—issued inflation-linked bonds in the first half of the year.

      •LCY bond issuance dropped sharply in 2Q11 on the back of a decline in issuance of short-term bills by central banks and monetary authorities, which was mostly a result of reduced sterilization activities. Meanwhile, authorities issued more at the long-end of the yield curve, taking advantage of the compression of spreads between 2- and 10-year government bonds.

      •Issuance by government sector entities—other than central banks and monetary authorities—rose 7.4% q-o-q and 11.6% y-o-y, while issuance from corporates increased 11.8% q-o-q and 10.7% y-o-y.

      •The corporate bond market in emerging East Asia expanded 4.4% q-o-q in 2Q11, led by Indonesia, which grew 8.9%, followed by the PRC, Malaysia, and Singapore.

      •The PRC’s corporate bond market grew at a rapid rate of 6.3% q-o-q in 2Q11 and is now the region’s largest corporate bond market, supplanting the Republic of Korea. The PRC’s medium-term note (MTN) sector is still the largest sector of the PRC corporate bond market, comprising 33.5% of the total.

      •Movements in corporate bond credit spreads for high yield and high grade bonds differed a great deal across markets in 2Q11. Credit spreads for high grade corporate bonds widened in the PRC, Malaysia, and Thailand, but tightened in the Republic of Korea. Credit spreads for Korean, Malaysian, and Thai high yield bonds tightened in 2Q11, while they were largely unchanged in the PRC.

      •G3 currency issuance in the region in 2011 reached US$55.4 billion through the end of July as funding conditions in global markets remained favorable. G3 issuance is on track this year to surpass the US$87.2 billion of issuance in 2010.

      •The risks to the outlook are tilted to the downside. These include (i) a severe slowdown or contraction in mature economies that might impact exports from the region, (ii) destabilizing capital flows, (iii) a lack of timely and appropriate policy interventions in mature markets, and (iv) potential commodity price fluctuations.

      Introduction: Global and Regional Market Developments

      The external environment facing emerging East Asian economies is bleak.² Unresolved sovereign debt issues in the United States (US) and an ongoing eurozone debt crisis has jolted global asset markets.

      Global stock market turbulence and rising volatility has fed investor fears and prompted safe haven flows into gold, the bonds of higher rated corporates with strong balance sheets, long-dated US treasuries, Japanese yen, and Swiss francs. The sovereign debt crises in mature markets and the potential impact on the wider economy have led investors to re-think their definitions of risk-free and risky assets. Furthermore, investors are now factoring in an extended period of weakness in the US and other mature economies. This worrying macro backdrop is likely to continue dampening investor sentiment in the medium-term.

      US treasury yields are hovering near historic lows,³ reflecting concerns over slowing global growth and debt sustainability in developed economies (Figure A). Mixed economic data and the unprecedented announcement of the US Federal Reserve that it will keep rates low over the next 2 years have fuelled expectations that growth may remain weak and further stimulus measures are in the offing.

      Corporate bond spreads in the US, Japan, and Europe have declined since the beginning of the year, although European corporate spreads have turned upward in recent weeks (Figure B). Rising risk aversion has sharply dragged down global equity markets, particularly in the aftermath of Standard & Poor’s (S&P) downgrade of US sovereign debt (Figure C).

      Emerging market economies are increasingly viewed as a relatively safe shelter. Investor preferences for emerging market assets are reflected in JP Morgan’s Emerging Markets Bond Index (EMBI) for sovereign stripped spreads (Figure D) as well as an outperformance in credit default swap (CDS) spreads for emerging East Asian government bonds (Figure E) at the same time that CDS spreads for European countries have presented a more mixed picture (Figure F).

      Capital flows into emerging East Asian bond markets remain strong as investors chase yields that are being buoyed by sound fundamentals, interest rate differentials—resulting from continued accommodative monetary policies in mature markets, and the potential appreciation of the region’s currencies.

      As the correlation between the index returns of US treasuries and Asian government bonds has weakened, capital flows into Asia have risen as investors seek returns and diversify away from mature markets (Figure G).

      Figure A: 10-Year Government Bond Yields (% per annum)

      Figure B: Corporate Bond Spreadsa

      Figure C: MSCI Indexes (January 2007 = 100)

      Figure D: JPMorgan EMBI Sovereign Stripped Spreadsc

      Figure E: Credit Default Swap Spreads (senior 5-year)c

      Figure F: Credit Default Swap Spreads for Select European and Emerging Markets (senior 5-year)c

      EMBI = Emerging Market Bond Index, UK = United Kingdom, US = United States.

      a. Bond spread refers to the difference between yields of 5-year bonds issued by BBB-rated finance companies and yields of sovereign benchmark bonds of the same tenor.

      b. Emerging Asia includes People’s Republic of China; India; Indonesia; Republic of Korea; Malaysia; Pakistan; Philippines; Taipei,China; and Thailand.

      c. US$ spread based on sovereign bonds.

      Note: Data as of 12 August 2011.

      Source: Thomson Reuters, Morgan Stanley Capital International (MSCI) Barra, and Bloomberg LP.

      Figure G: 5-Year US Treasury Yields and Correlation between Index Returns of US Treasuries and Asian Government Bonds

      Note: Data as of 12 August 2011.

      Source: Bloomberg LP.

      Demand for local currency (LCY) government bonds picked up in the middle of 2010 and remained strong throughout the first half of 2011. Overall, there has been a bullish flattening of yield curves in most markets; in many cases there has been a downward shift of the entire yield curve. Yields were pushed down even further in most markets after the S&P downgrade of US sovereign debt.

      Total LCY bonds outstanding in emerging East Asia grew 2.4% on a quarterly basis in 2Q11 to reach US$5.5 trillion, with growth driven more by the region’s corporate markets rather than its larger government markets. The most rapidly growing corporate bond markets in 2Q11 were Indonesia (8.9%), the People’s Republic of China (PRC) (6.3%), Malaysia (4.9%), and Singapore (4.7%).

      Growth in emerging East Asian economies is expected to moderate, yet remain relatively strong, in the second half of 2011. Inflation continued to rise in the first half of 2011 across much of the region, driven by higher commodity prices and the strong economic recovery. This led to increased issuance of inflation-linked sovereign bonds in some countries.

      At end–December 2010, emerging East Asia’s share of the global bond market stood at 8.0%, compared with only 2.1% before the onset of the 1997/98 Asian financial crisis (Table A). The two largest markets in the region were the PRC (4.7% of the global bond market) and the Republic of

      Enjoying the preview?
      Page 1 of 1