This edition shows how a modest improvement in economic fundamentals has buoyed East Asia’s local currency bond (LCY) markets, but potential renewed increases in inflation and further interest rate hikes could pose risks for the region’s borrowers.

There is an urgent need to grow green bonds and other debt instruments that promote sustainability to give emerging economies the financing they need to meet climate targets. The market has expanded greatly over the past decade—but it is fragile, with events in 2022 triggering a drop in issuance, although a rebound is expected in 2023–2024, a study by IFC and asset manager Amundi finds. Actions that can be taken to make this asset class more investor friendly include requiring issuers to disclose how the bond helps achieve sustainability targets, more targeted interventions by central banks, and deploying technologies like blockchain to make transactions more transparent.

This edition presents recent developments in emerging East Asian local currency bond markets and features a special section about how increased climate risk awareness can influence investors’ trading decisions.

This edition notes slowing growth in the last quarter of 2022 in emerging East Asia’s local currency (LCY) bond market, though aggregate issuance of LCY bonds by these economies reached a record high in 2022.

Bond issuance; Climate finance; ESG bonds; Green bonds; Public Financial Management; Social bonds; Sovereign debt management; Sustainable finance; Sustainability-linked bonds