KUALA LUMPUR: A group of East Asia and Pacific central banks is closing its US-dollar denominated bond fund and transferring the investment to a local-currency bond fund 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 and Executives Meeting of East Asia Pacific (EMEAP) said that from 2003 to 2015, issuance of local currency-denominated bonds in Asia ex-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 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 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
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