ADB Joins 'Warning' Chorus: Emerging East Asia’s Bond Markets Face Rising Risks

It's supposed to be a bull market, but then why the barrage of warnings?

This time the ADB sounds the alarm bells.

From the ADB's News Release: (bold mine)

Emerging East Asia’s bond markets were volatile due to rising global concerns over the unresolved Greek debt crisis and the possibility of an interest rate hike in the United States, the Asian Development Bank’s (ADB) latest Asia Bond Monitor said.

“Low liquidity in the region’s bond markets could worsen the impact of an outflow of funds leading to more volatile price swings,” said ADB Chief Economist Shang-Jin Wei. “Undertaking policies to improve efficiency and transparency of financial markets, coupled with some appropriate prudential regulation, can help countries strengthen resilience against external shocks.”

The report notes that while emerging East Asian countries have made strides in broadening bond markets, global risks have the potential to put further strain on markets that lack liquidity. The prospect of higher US interest rates could further strengthen the dollar, hurting issuers of foreign currency bonds and increasing debt servicing costs in local currency terms on existing US dollar bonds.

If the region's system has been 'sound', then there should hardly be any material worries on the potential impact from US interest rates or Greece debt crisis. 

But is it?