ADB: EMERGING EAST ASIA BOND YIELDS DIVERGE AS COVID-19 UNCERTAINTY CONTINUES

KUALA LUMPUR, June 25 -- Bond yields in emerging East Asia diverged due to market-specific factors, while uncertainty on the COVID-19 pandemic and concerns over inflationary pressure led to subdued investor sentiment, said the latest issue of the Asian Development Bank’s (ADB) Asia Bond Monitor.

It said yields on short-term (two-year) government bonds from Feb 28 to May 21 largely declined on the back of accommodative liquidity conditions while uneven recovery paths and market-specific economic fundamentals caused long-term (10-year) government bond yields to diverge across the region. 

In a statement today, ADB chief economist Yasuyuki Sawada said persistent uncertainty surrounding the COVID-19 pandemic and looming inflationary pressure had put a dent in emerging East Asia’s bond markets, leading to volatility and mixed performances in the region’s financial and equity markets.

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“The region’s fast-expanding sustainable bond markets, underpinned by a growing interest in a green and inclusive recovery and conducive public policies, will be key to the region’s efforts to rebuild smarter after the pandemic,” he said. 

According to Asia Bond Monitor, the COVID-19 pandemic remains the biggest risk to East Asia’s bond markets with renewed outbreaks, the emergence of new virus variants, and slower-than-expected vaccine rollouts in some markets may hamper economic activity.

It noted that concerns that the US Federal Reserve might tighten monetary policy in response to growing inflationary pressure were weighing on financial conditions in the region.

The report noted that China, Hong Kong, Indonesia and Vietnam posted declines in yields on both short-term and long-term government bonds, while South Korea, Malaysia, and the Philippines posted increases.

Meanwhile, sustainable bond markets in ASEAN plus China, Hong Kong, Japan, and South Korea totalled US$301.3 billion (US$1=RM4.155) at the end of the first quarter, growing 13.2 per cent from the previous quarter and 44.5 per cent from a year earlier.

The region’s market now accounts for about 20 per cent of the global sustainable bond market, making it the largest after Europe’s.

-- BERNAMA