Asia Bond Monitor - November 2021

East Asian local currency bond markets have grown significantly, with issuance increasing in Q3 2021. The region's economic outlook is positive, but there is a risk of another taper tantrum. Price differences between labeled and unlabeled green bonds exist.

Format: Paperback / softback
Length: 102 pages
Publication date: 30 May 2022
Publisher: Asian Development Bank

East Asia's local currency bond markets have experienced significant growth in recent months, with the aggregate size reaching USD21.7 trillion at the end of September 2021. This represents a 3.4% quarter-on-quarter increase and a 2.9% rise from the previous quarter. The issuance of local currency bonds also saw a notable increase, with a 6.8% quarter-on-quarter growth to USD2.4 trillion in Q3 2021. Additionally, sustainable bond markets in the ASEAN+3 region continued to expand, reaching a size of USD388.7 billion at the end of September.

The economic outlook for East Asia remains positive, with many countries experiencing robust growth. However, there are concerns about the risk of another taper tantrum, which could impact financial markets and economic stability. One key factor contributing to the growth of local currency bond markets is the increasing demand for sustainable investments. Investors are increasingly seeking out bonds that align with their environmental, social, and governance (ESG) goals, and the ASEAN+3 region has been a leader in this regard.

Another factor driving the growth of local currency bond markets is the need for infrastructure development in many East Asian countries. Governments are investing heavily in infrastructure projects to improve transportation, energy, and telecommunications networks, and local currency bonds are often used to finance these initiatives.

Despite the positive developments, there are also some challenges that need to be addressed. One concern is the price difference between labeled and unlabeled green bonds. While labeled green bonds are generally considered to be more sustainable and have a lower risk of default, they also tend to carry a higher price premium. This can make it difficult for issuers to attract investors, particularly in times of economic uncertainty.

To address these challenges, governments and financial institutions need to work together to promote the development of the local currency bond market. This can include measures such as providing regulatory support, promoting sustainable investment practices, and developing a more transparent and standardized pricing framework for green bonds.

In conclusion, East Asia's local currency bond markets have experienced significant growth in recent months, driven by the increasing demand for sustainable investments and the need for infrastructure development. While there are challenges to be addressed, such as the price difference between labeled and unlabeled green bonds, there are also opportunities for governments and financial institutions to work together to promote the growth and sustainability of the local currency bond market.

East Asia's local currency bond markets have experienced significant growth in recent months, with the aggregate size reaching USD21.7 trillion at the end of September 2021. This represents a 3.4% quarter-on-quarter increase and a 2.9% rise from the previous quarter. The issuance of local currency bonds also saw a notable increase, with a 6.8% quarter-on-quarter growth to USD2.4 trillion in Q3 2021. Additionally, sustainable bond markets in the ASEAN+3 region continued to expand, reaching a size of USD388.7 billion at the end of September.

The economic outlook for East Asia remains positive, with many countries experiencing robust growth. However, there are concerns about the risk of another taper tantrum, which could impact financial markets and economic stability. One key factor contributing to the growth of local currency bond markets is the increasing demand for sustainable investments. Investors are increasingly seeking out bonds that align with their environmental, social, and governance (ESG) goals, and the ASEAN+3 region has been a leader in this regard.

Another factor driving the growth of local currency bond markets is the need for infrastructure development in many East Asian countries. Governments are investing heavily in infrastructure projects to improve transportation, energy, and telecommunications networks, and local currency bonds are often used to finance these initiatives.

Despite the positive developments, there are also some challenges that need to be addressed. One concern is the price difference between labeled and unlabeled green bonds. While labeled green bonds are generally considered to be more sustainable and have a lower risk of default, they also tend to carry a higher price premium. This can make it difficult for issuers to attract investors, particularly in times of economic uncertainty.

To address these challenges, governments and financial institutions need to work together to promote the development of the local currency bond market. This can include measures such as providing regulatory support, promoting sustainable investment practices, and developing a more transparent and standardized pricing framework for green bonds.

In conclusion, East Asia's local currency bond markets have experienced significant growth in recent months, driven by the increasing demand for sustainable investments and the need for infrastructure development. While there are challenges to be addressed, such as the price difference between labeled and unlabeled green bonds, there are also opportunities for governments and financial institutions to work together to promote the growth and sustainability of the local currency bond market.

Weight: 333g
Dimension: 298 x 216 (mm)
ISBN-13: 9789292691608