Emerging East Asia’s local currency (LCY) bond markets are broadly holding up well, but widening credit spreads, a strong United States dollar, Greece’s debt crisis, and plunging oil prices all pose risks to the region’s bond markets, says the latest Asia Bond Monitor report. The amount of outstanding LCY bonds in the region continued to expand in 4Q14 to reach US$8.2 trillion at end-December. Government bonds outstanding totaled US$4.9 trillion while corporate bonds stood at US$3.3 trillion. The People’s Republic of China’s LCY bond market continued to dominate the region in terms of size, accounting for 63.4% of the region’s total bonds at end-December. The next largest bond markets were those of the Republic of Korea and Malaysia. For a copy of the full report please click on the following link: http://asianbondsonline.adb.org/documents/abm_mar_2015.pdf
In a meeting on 17 March, the Board of Governors of Bank Indonesia decided to keep the benchmark interest rate steady at 7.5%. Also on 17 March, the Policy Board of the Bank of Japan decided to continue with its quantitative and qualitative easing in order to achieve the central bank’s inflation target of 2.0%.
Consumer prices in Hong Kong, China rose 4.6% year-on-year (y-o-y) in February after gaining 4.1% y-o-y in January. The largest increase came from utilities prices, which rose 21.8% y-o-y in February, due to the expiration of a one-off government subsidy. Consumer prices in Malaysia rose 0.1% y-o-y in February following a 1.0% y-o-y increase in January. The fall in consumer price inflation was due to a decline in transport prices, which fell 16.8% y-o-y, driven by lower oil prices.
The Producer Price Index in the Republic of Korea fell 3.6% y-o-y in February, the same decline as in January, largely due to falling prices of manufacturing products. On a month-on-month (m-o-m) basis, the index inched up 0.1% in February following a 1.2% decrease in January.
Indonesia recorded a trade surplus for the third month in a row in February at US$738 million, following a surplus of US$744 million in January. Japan’s merchandise trade deficit narrowed to JPY424.6 billion in February as exports of goods rose 2.4% y-o-y to JPY5,941.1 billion, while importable items fell 3.6% y-o-y to JPY6,365.7 billion, according to Ministry of Finance data. In Singapore, non-oil domestic exports fell 9.7% y-o-y in February after posting 4.3% y-o-y growth in January.
Overseas workers remitted a total of US$2.0 billion to the Philippines in January, up 0.2% y-o-y. The bulk of the remittances came from workers in the United States, Saudi Arabia, United Arab Emirates, and the United Kingdom.
Last week, Ratings and Investment affirmed Indonesia’s sovereign credit ratings at BBB– with a stable outlook. Also last week, Fitch Ratings affirmed its BBB– long-term foreign currency issuer default rating and BBB long-term local currency issuer default rating for the Philippines. Both ratings were given a stable outlook.
Government bond yields rose last week for all tenors in the People’s Republic of China (PRC) and Viet Nam, and for most maturities in Indonesia and Singapore. On the other hand, yields fell for all tenors in the Republic of Korea following the policy rate cut in the earlier week, and Malaysia on subdued inflation. Yield spreads between 2- and 10-year tenors narrowed in all markets except for the PRC, Indonesia, and Thailand.