ADB – Asia Bond Monitor, Mar 2024

Financial conditions in emerging East Asia improved slightly between December 2023 and February 2024, driven by expectations of US monetary policy easing, moderating inflation, and strong economic performance in the region. However, uncertainty about the timing and extent of US monetary policy easing, as well as concerns about China's economic slowdown and trade tensions, tempered the recovery. Despite regional currencies depreciating against the US dollar, most markets saw equity gains, lower risk premiums, and positive foreign portfolio inflows. Bond yields also saw mixed movements, with short-term yields decreasing and long-term yields rising slightly. Risks to regional financial conditions remain downside due to uncertainties around US monetary policy easing and potential spillover effects from the economic slowdown in China. The local currency bond market in emerging East Asia reached USD25.2 trillion in Q4 2023, with government bonds accounting for the majority of outstanding bonds. Government bond issuance decreased in Q4, while corporate bond issuance was also lower, particularly in the PRC.