Asia’s Local Currency Bond Markets to Expand This Year: ADB
MANILA: Emerging East Asia’s local currency bond markets are expected to expand this year with several governments likely to sell debt to pump-prime their economies. Companies are also expected to turn to local markets to refinance or raise fresh funds, said in Asian Development Bank’s Asia Bond Monitor (ABM). However, there are risks. Increased sovereign bond sales could raise yields, making issuance costlier. Also, investor concerns over sustained fiscal deficits could push up risk premiums and hurt sovereign credit ratings of some economies.
Companies face greater financing risks with borrowing costs remaining high and may get crowded out by higher debt issuance by governments. With Asia’s financial firms huge buyers of government’s bonds, debt sales need to be managed carefully to maintain financial stability.
“The economic outlook remains gloomy,” said Jong-Wha Lee, Head of the ADB’s Office of Regional Economic Integration. “Several Asian nations will rely more on local currency bonds to finance their fiscal stimulus packages. This provides an excellent opportunity for the region to further develop a more dynamic domestic bond market.”
Overall, emerging East Asia’s local currency bond markets held up well in the face of the global financial storm, continuing to expand throughout 2008. By end-December, total outstanding local currency bonds were US$3.7 trillion, 14.9% above the end-2007 level. The increase, however, was below the 17.6% annual growth rate in the third quarter of the year.-SANA
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