East Asia Pacific bank group reinvesting in local-currency bond fund

By Wendy Van Sickle

Columbus, Ohio, July 1 – A group of East Asia Pacific central banks is closing its dollar denominated bond fund and moving the investment to a local-currency bond fund to “enhance local-currency bond market development in the region,” according to an press release from the Executives’ Meeting of East Asia Pacific (EMEAP).

EMEAP, a group of 11 central bank and monetary authorities in the East Asia and Pacific region, explained that it set up its Asian Bond Fund initiative to support local-currency bond market development and offer member central banks a diversified regional investment opportunity for their reserves management.

Asian Bond Fund 1 was established in 2003 as a stepping stone to Asian Bond Fund 2 and helped develop the regional framework for EMEAP central bank cooperation.

Asian Bond Fund 1 is managed by the Bank for International Settlements. It invests in dollar-denominated bonds issued by sovereign and quasi-sovereign issuers in EMEAP economies other than Japan, Australia and New Zealand.

Asian Bond Fund 2, comprising the Pan-Asia Bond Index Fund and eight single-market funds, is managed by private-sector fund managers with Bank for International Settlements as its administrator. It invests in local-currency bonds in EMEAP economies, except Japan, Australia and New Zealand.

“Asian local-currency bond markets have grown steadily since the inception of [Asian Bond Fund 1], providing local-currency funding for borrowers in the region and local-currency savings vehicles for regional investors,” the news release stated. “From 2003 to 2015, issuance of local currency-denominated bonds in Asia ex Japan recorded a near eight-fold increase from around $125 billion to more than $1 trillion.”

In April, EMEAP determined its initial bond fund had achieved its purpose and should therefore be closed. Its proceeds will be reinvested in Asian Bond Fund 2 over the course of several months.

In addition to the reinvestment in Asian Bond Fund 2, the EMEAP Asian Bond Fund Oversight Committee continues to evaluate other ways to enhance local-currency bond market development in the region, the release stated.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.