MANILA, June 26 (Xinhua) -- Bond yields in emerging East Asia increased amid strengthened expectations that interest rates will remain elevated for a longer period, according to a new Asian Development Bank (ADB) report released Wednesday.
The latest edition of Asia Bond Monitor said bond outflows from regional markets reached 20 billion U.S. dollars in March-April. Slower-than-expected disinflation supported the likelihood of higher-for-longer interest rates and pushed up short-term and long-term bond yields in both advanced economies and regional markets.
Regional currencies depreciated against the U.S. dollar, and credit default swap spreads widened in most markets, the report said, adding that most regional equity markets posted gains supported by a sound economic outlook, but equity markets in the Association of Southeast Asian Nations (ASEAN) witnessed outflows of 4.7 billion dollars.
"Emerging East Asia's financial conditions remain resilient," said ADB Chief Economist Albert Park. But Park said that lingering geopolitical tension and adverse climate events pose upside risks to inflation, adding uncertainty over the path of disinflation.
"Some regional monetary authorities may hold interest rates higher for a longer period to safeguard currencies amid the uncertainty in disinflation trends and global monetary stances," he added.
According to the report, emerging East Asia's local currency bond market experienced a slower expansion in the first quarter of 2024 at 1.4 percent, reaching 24.7 trillion dollars. The regional corporate segment grew, supported by robust issuance in China, with the Chinese government implementing measures to boost the domestic economy.
The report said that higher-for-longer interest rates overshadowed sustainable bond markets in ASEAN, China, Japan, and South Korea (ASEAN+3), leading to contractions in sustainable bond issuance in the first quarter of 2024, which reached 805.9 billion dollars by the end of March.
This market remains the world's second-largest sustainable bond market, with an 18.9 percent global share, trailing the European Union's 37.6 percent. However, sustainable bonds only comprise 2.1 percent of ASEAN+3's total bond market, compared with 7.3 percent in the European Union. ■
