The overall growth in local currency ( LCY ) bond issuance in emerging East Asia moderated to 3.5% in the third quarter of 2025 to reach US$3.2 billion, down from a 14.9% increase in the previous quarter, according to the latest issue of Asia Bond Monitor released by the Asian Development Bank ( ADB ) on November 27.

Government bond issuance in the region rose by only 1.2%, compared with an 18.4% rise in the second quarter, amid a slowdown in most regional markets. Issuance of government bonds in China, which comprised 87.2% of the regional total, inched up by just 0.9%. Increased bond issuance from local governments and policy banks slightly outweighed the contraction in treasury bond issuance.

Asean markets also reported a slowdown in government bond issuance growth, easing to 4.7% in the three months to September from 9.2% in the previous quarter, on the back of smaller increases in the Philippines and Singapore – both of which had notable large-volume issuances in the second quarter.

Issuance in South Korea increased at a slower pace at 3.4% in the third quarter from 10.2% in the previous quarter on the back of the government’s front-loading policy in the first half of the year. Meanwhile, issuance activity in Hong Kong contracted by 46.3% in the third quarter, in line with the auction schedule, following a surge in issuance in the previous three months.

Asean leads rise in corporate issuance  

Corporate bond issuance rose 5.1% during the period, with higher volume recorded in almost all regional markets. However, regional growth fell sharply from a 25.3% jump in the second quarter, which was largely driven by corporate bond sales in China.

Growth in China’s corporate issuance slowed to just 2.6% in the July-September period from 28.9% in the previous quarter, due to tepid demand for borrowing amid persistent economic uncertainties.

In the Asean markets, corporate issuance climbed 48.3% in the third quarter, underpinned by continued monetary policy easing. Corporate bond issuance in South Korea was largely unchanged from the previous quarter, as bond yields remained elevated amid declining expectations of a policy rate cut.

Central bank bond issuance in the region rose 5.7%, led by Indonesia ( 59.9% ) and Vietnam ( 129.5% ), following interventions to support their respective currencies.

At the end of September, banking institutions, insurance companies, and pension funds had increased their LCY bond holdings from a year earlier, while central banks had reduced their share of holdings. Banking institutions were the largest investor group in the region’s treasury bond market, accounting for 36.6% of outstanding treasuries, up from 35.2% a year earlier. Banks’ holdings share increased the most in the Philippines ( from 45.7% to 51.4% ), followed by China ( from 68.1% to 69.9% ) and Indonesia ( from 19.5% to 21.3% ).

The holdings share of insurance companies and pension funds rose to 29.1% at the end of September, from 28.8% a year earlier. These domestic investors supported the market amid a September sell-off. Meanwhile, the region’s central banks and foreign investors marginally reduced their holding shares from 5.5% and 11.2%, respectively, to 5.2% and 11%.

The shares of other investors also declined from 17% to 15.8% during the review period. As a result, market concentration of investors in some emerging East Asian treasury bond markets, such as China and the Philippines, increased.

Stronger GDP growth boosts yields

Bond yields rose across most emerging East Asian economies amid stronger GDP growth and a wait-and-see monetary policy stance. While inflation largely remained within central bank targets, some markets, such as Hong Kong, Indonesia, South Korea, and Singapore, saw inflation rise during the period.

Bond yields in Indonesia and the Philippines declined amid continued rate cuts by Bank Indonesia and the Bangko Sentral ng Pilipinas ( BSP ). Bank Indonesia cut policy rates at its September meeting, for the fifth time this year, citing the need to strengthen economic growth as domestic demand softened.

The BSP unexpectedly lowered its policy rate by 25bp on October 9 for the fourth time in 2025, citing a weakened domestic economic outlook due to a decline in business confidence amid a corruption scandal involving public infrastructure spending.

According to ADB, risks to regional financial conditions remained largely balanced. On the positive side, the easing of trade tensions resulting from trade deals between the United States and several regional economies will help reduce near-term economic uncertainty. Also, the expected US rate cuts will allow regional central banks to maintain an accommodative monetary stance.

Nevertheless, uncertainty remains over potential setbacks to the implementation of trade agreements with the US, as well as the future path of US monetary policy amid persistently above-target inflation. The bank also cites headwinds in China’s property market and lingering geopolitical risks.