ADB says East Asian bond markets in good shape, but warns of risks ahead

Tokyo

WITH the possible start of the season of the US Federal Reserve's rate rises next month, East Asian bond markets are in relatively good health, with bond yields declining and prices rising, the Asian Development Bank (ADB) said on Thursday.

But it warned that market shocks could be in store - in the form of tightening liquidity in bond markets leading to investor withdrawals, large price swings and destabilising outflows of funds from the region, it said in its latest Asia Bond Monitor.

For now, conditions appear calm. ADB chief economist Shang-Jin Wei said: "Financial markets have been somewhat calmer recently with the (Fed) holding off a rate hike in September, China carrying out further monetary stimulus and oil prices remaining subdued. Overall, the markets are better prepared to deal with any impact a US rate hike may have on another outflow of foreign investm…