Mecklai: Asian debt market attractive for investment

Mecklai graph of the day: Debt set go

The Asian Debt market has been in a state of constant volatility as the dropping yields and the rising bond prices have made it look like an attractive sector to park investments.

Most of the countries which constitute the ADXY are showing an obvious decline in yields especially India which has showed a significant drop of 0.14 percent and Indonesia with a drop of 0.11  percent this month. This could be due to the relaxation in foreign institutional investor (FII) investment in sub-limits in the debt market which would ease liquidity conditions and help the government fund it current account deficit. The recently released WPI data brought a sigh of relief for the Indian government and has enhanced the possibility of a higher rate cut which could improve the economic sentiment.

Another reason for the fall in yields is due to the fall in commodity prices globally. The sharp decline in prices of precious metals like gold and silver, as also oil have brought about a soothing effect as global inflation could fall. As gold is considered a safe haven for all the investors, its recent fall signaled a rush for buying the government bonds.

Japans ongoing stimulus by the BOJ governor Kuroda to bring the economy's inflation levels to 2 percent have caused an excessive liquidity rush to the emerging markets in the Asian economy. As the emerging economies promise a higher interest rate the global investments are tipping towards them making them a lucrative haven to invest in. Hopefully the Asian countries would take advantage of the situation and help further their growth globally.

Below graph shows change in ten year government bond yields of Asian economies since 11 April 2013 to the present date 22 April 2013.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More