Developed market bond yields and systemic EM risk

February 9, 2014

A new BIS paper argues that the expansion of EM local-currency bond markets and foreign-currency EM corporate issuance have strengthened the link between local EM financial conditions and global bond yields. The consequences would be (i) increased dependence of emerging financial systems on developed countries’ non-conventional monetary policies, (ii) decreased effectiveness of local monetary policies, and (iii) new systemic risks.

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How easy G3 monetary policy spills over into East Asia

November 2, 2013

A recent BIS paper illustrates the consequences of highly accommodative monetary policy in the G3 for East Asia. These include lower policy rates than warranted by domestic conditions, lower bond yields and appreciation pressure on currencies. Importantly, easy G3 monetary conditions stimulate Asian foreign currency borrowing in many forms, including letters of credit, forward selling of foreign currencies and international bond issuance.

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