TEMPO.CO, Jakarta - Indonesia was the fastest growing corporate bond market in the region during the first quarter, expanding 26.9 percent year-on-year to $20 billion, said the latest edition of the Asia Development Bank's (ADB) Asia Bond Monitor. It said currency bond markets in the market expanded by 12.1 percent year-on-year to $6.7 trillion at the end of March 2013, driven by double-digit growth in corporate bonds.
"We should see further growth in the bond markets given the region's economies are continuing to expand and with foreign and domestic investors increasingly comfortable with Asian local currency debt," said Iwan J. Azis, Head of ADB's Office of Regional Economic Integration. "Governments and companies are also much better now at managing their debt than they were a decade ago."
The region's corporate bond market expanded 19.5 percent year-on-year and 4.6 percent quarter-on- quarter to $2.4 trillion at the end of March. Meanwhile, the government bond market grew at a more modest annual pace of 8.3 percent and a quarterly rate of 2.0 percent to $4.3 trillion.
Indonesia's lead was followed by the People's Republic of China (PRC), which had the region's largest corporate bond market at $1.1 trillion, up 25.3 percent year on year. New corporate bond issues in the first quarter were once again dominated by banking and financial institutions.
The local currency bond market in Indonesia expanded 13.9 percent on year and 5.9 percent on quarter to $119 billion as of the end of March. Its government bond market increased 11.6 percent to $98 billion during the period
Foreign holdings of most emerging East Asian local currency government bonds continued to rise in the first quarter with yields in the region still more attractive than those in the U.S. and many European markets and on the perception that Asian credit quality is on a par, if not better, compared to advanced economies, said the report
Foreign holdings accounted for 32.6 percent of Indonesian local currency government bonds as of end-March, the largest among emerging East Asian economies. Malaysia followed closely with foreign holdings reaching 31.2 percent.
Yields on most government bonds have been trending lower since the end of 2012 in the region as inflation moderates and with policy rates largely unchanged. The only exceptions are Hong Kong, China; Indonesia; and Singapore where government bond yields have risen for most maturities since the beginning of 2013 due to inflationary concerns.
The quarterly Asia Bond Monitor assesses the bond markets of the PRC; Hong Kong, China; Indonesia; the Republic of Korea; Malaysia; the Philippines; Singapore; Thailand; and Viet Nam. (*)