Executives’ Meeting of East Asia Pacific Central Banks (EMEAP) Asian Bond Fund (ABF) Initiative

Established in 1991, the Executives’ Meeting of East Asia Pacific Central Banks (EMEAP) is a forum of central banks in the East Asia and Pacific region that aims to strengthen cooperation among its 11 members. In June 2003, EMEAP launched the first phase of the Asian Bond Fund (ABF1).  Designed to promote bond market development in the region, the initiative facilitates channeling the sizeable official reserves held by Asian economies back into the region. Also, ABF1 provides a useful means for Asian central banks to diversify investments beyond more traditional reserve assets.

With an initial size of about US$1 billion and managed passively by the Bank for International Settlements (BIS), the ABF1 is fully invested in a basket of US dollar-denominated bonds issued by Asian sovereign and quasi-sovereign issuers in EMEAP member economies (with the exception of Australia, Japan, and New Zealand). Building on the success of the ABF1, EMEAP launched the second phase of the Asian Bond Fund initiative (ABF2) in December 2004, eight months after its announcement in April 2004. ABF2 will invest in domestic currency bonds issued by sovereign and quasi-sovereign issuers in eight EMEAP members. Amounting to around US$2 billion, ABF2 is split equally into two components: (i) a single bond fund investing in sovereign and quasi-sovereign local currency denominated bonds issued in eight EMEAP markets (also known as the ABF Pan-Asian-Bond Index Fund); and, (ii) eight Single-market Funds, each investing in sovereign and quasi-sovereign local currency denominated bonds issued within EMEAP markets. In May 2005, implementation began with the completion of the US$2 billion in funding, and the appointment of fund managers, a master custodian, and index provider for ABF2.

EMEAP includes central banks from Australia; People’s Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; New Zealand; Philippines; Singapore; and Thailand.