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Between 1 March and 15 May, yields for both 2-year and 10-year government bonds declined in most emerging East Asian markets. Among all bond markets in emerging East Asia, Indonesia experienced the largest decline in yields during the review period, driven by positive investor sentiment and an expected credit rating upgrade from Standard and Poor’s Global Ratings. Financial stability has improved as evidenced by declines in emerging East Asia’s credit spreads. Foreign capital flows in emerging East Asia have also recovered. Despite improved financial stability and receding risks for emerging East Asia’s bond markets, a number of risks remain, including tightening global liquidity conditions and the vulnerability of financial markets to cyberattacks.

This issue of the Asia Bond Monitor includes two special discussion boxes. Box 1 discusses the risks to emerging Asia’s financial stability under tightening global liquidity conditions. Box 2 discusses cybersecurity and financial stability.