The stunning revolution of Asian bond markets

GLOBAL bond markets have experienced dramatic changes since the heady days of the year 2000 (remember the tech bubble?), but nowhere has that been more the case than here in Asia, where from previously being a mere backwater of fixed income investment, we now have a myriad of valuable opportunities. So how exactly have these markets developed and what might the next 15 years bring?

The most obvious thing to look at is size. The sum of all domestic Asian bond markets (excluding Japan but including India in line with the geographic definition of most indices of "Asian Bonds") is now probably about US$9.5 trillion, up from maybe just over US$500 billion as we entered the new millennium - a staggering increase of some 25 per cent annualised.

So what has driven that growth? The first factor is the sheer size of Asian economies. According to the IMF, the Asian economies which make up the major bond issuers in the region have quadrupled in size from 2000 to 2015, increasing their contribution to global GDP from around 20 per cent to 30 per cent. But this is not reflected in the nearly twenty-fold increase in the bond markets, so there must be something else going on.