East Asia Pacific Central Banks Reinvest Asian Bond Funds

KUALA LUMPUR, July 1 (Bernama) -- A group of East Asia Pacific central banks is closing its US-dollar denominated bond fund and transferring the investment to a local-currency bond fund in order to enhance local-currency bond market development in the region. Asian local ­currency bond markets have grown steadily since the inception of Asian Bond Fund 1 (ABF1), providing local ­currency funding for borrowers in the region and local ­currency savings vehicles for regional investors. A joint statement by Bank Negara Malaysia (Malaysia's Central Bank) and Executives' Meeting of East Asia Pacific (EMEAP) said from 2003 to 2015, issuance of local currency-denominated bonds in Asia excluding Japan recorded a near eight-fold increase from around US$125 billion to more than US$1 trillion. In April this year, the EMEAP group determined that ABF1 has achieved its original purpose and that the fund should be closed. The proceeds are being reinvested in Asian Bond Fund 2 (ABF2) over the course of several months, to ensure a smooth transition and minimal market impact. The EMEAP central banks, a group of 11 central bank and monetary authorities in the East Asia and Pacific region, set up the Asian Bond Fund initiative in order to support local-currency bond market development and offer EMEAP member central banks a diversified regional investment product for their reserves management. ABF1 was established in 2003 as a stepping stone to ABF2, and helped to develop the regional framework for EMEAP central bank co-operation. ABF1 is managed by the Bank for International Settlements (BIS) on behalf of EMEAP central banks. It invests in US dollar-denominated bonds issued by sovereign and quasi-sovereign issuers in EMEAP economies other than Japan, Australia and New Zealand. ABF2, comprising the Pan-Asia Bond Index Fund (PAIF) and eight single-market funds, is managed by private-sector fund managers with the BIS as the administrator. It invests in local currency-denominated bonds in EMEAP economies other than Japan, Australia and New Zealand. --BERNAMA