Improving sentiment lifts emerging East Asian bonds: ADB

MANILA - Improving global investment sentiment and financial conditions provided a much-needed lift for local currency bond markets in emerging East Asia, despite risks from the COVID-19 pandemic, said the latest issue of the Asian Development Bank's (ADB) Asia Bond Monitor released on Friday.

Emerging East Asia consists of China, China's Hong Kong Special Administrative Region, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

The report said the government bond yields in most emerging East Asian markets declined from June 15 to Sept 11 on the back of accommodative monetary policies and weakening growth across the region.

Meanwhile, the report said that improving sentiment has led to gains in the region's equity markets and a narrowing of credit spreads, with most regional currencies strengthening against the US dollar.

The report said that local currency bonds outstanding in emerging East Asia reached $17.2 trillion at the end of June, up 5.0 percent from March this year and 15.5 percent higher than in June 2019.

As a share of regional gross domestic product, the report said that emerging East Asia's local currency bonds outstanding climbed to 91.6 percent at the end of June, from 87.8 percent in March, mainly due to the large amount of funding needed to fight the pandemic and mitigate its impact.

The report said that bond issuance in the region totaled $2 trillion in the second quarter, increasing by 21.3 percent from the first quarter this year.

China remained home to the region's largest bond market, accounting for 76.6 percent of the region's total bond stock as of the end of June, added the report.

The report said that the region's government bonds outstanding reached $10.5 trillion at the end of June and accounted for 60.8 percent of the region's aggregate bond stock. Corporate bonds, meanwhile, totaled $6.7 trillion.