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 Bond Financing for Renewable Energy.
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) Gross Domestic Product (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.