Demand resumes for local currency bonds

“Most emerging East Asia bond markets have regained their bounce,” said Iwan Azis, head of the Asian Development Bank’s (ADB) Office of Regional Economic Integration. “Thailand’s bonds though could buck the trend given recent political upheavals and investors there are likely to be cautious for some time.”

Despite recent improvements, the Asia Bond Monitor warns that markets could still be jolted by the ongoing tapering in US quantitative easing, the slowdown in economic growth in China as well as moves by the European Central Bank to counter the threat of deflation. 

Emerging East Asia is defined as the PRC; Hong Kong, China; Indonesia; Republic of Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.

Bond yields , which fall as demand increases, declined in most economies in the first four months of the year, dropping most in Indonesia, Thailand, and Vietnam. However, investors in Thai bonds are now on the sidelines and yields could rise going forward. Meanwhile, yields in the Philippines went up in January through April amid rising inflation.

The markets in the region also continue to grow in size with $7.6 trillion in bonds outstanding in the nine economies at the end of March 2014, up 2.1 per cent on quarter and 9.5 per cent higher than a year earlier. 

Thailand’s bond market expanded 1.2 per cent in the first quarter of 2014 to $281 billion from the previous quarter's level and by 5.7 per cent on year, as corporate bonds expanded 3.1 per cent on quarter and 12.6 per cent on year to $64 billion. 

Five major corporate bond issues by retail and telecommunication companies took place during the period. They were CP All, Minor International, Kiatnakin Bank, True Corporation, and Toyota Leasing (Thailand). 

Government bonds, meanwhile, rose 0.7 per cent on quarter and 3.8 per cent on year to $217.0 billion, boosted by government bonds and treasury bills sales.