KUALA LUMPUR : THE global bond market is expected to face a challenging 2014 on the back of rising interests, unpredictable volatility as well as anxiety from the United States Federal Reserve's quantitative easing (QE) tapering in the second quarter of last year. "The recent glory years for bond and sukuk issuances in Malaysia were definitely 2011 and 2012, and we saw a decrease of issuances last year and that's because of a number of reasons, which include rising interest rates and anxiety over QE tapering," said an investment banker who declined to be identified. "In bonds, as it is with everything else in business, it is a question of supply and demand. Supply and demand for bonds and sukuk are directly related to interest rates. We saw this happening in 2011 and 2012 when there was a rush to take advantage of the low interest rates. "We saw a decrease in bond issuance at the tail-end of last year because of the high interest pinch and this is a trend that will continue this year," said the banker. The banker explained that when it comes to bond issuances, the Malaysian market will see some activities in the first half of the year and a big drop in the second half. "High interests will be something that all issuers and borrowers will have to face throughout this year, but they will be manageable in the first half of the year compared with the second half," said the banker. However, all are not gloom and doom for the local bond market, according to Singapore-based Stephen Grundlingh , the co-chief executive officer and regional head of Southeast Asia at Templeton Asset Management Ltd , a subsidiary of Franklin Templeton Investments . "Generally speaking, we are anticipating the rates to go higher but only in the next 12 months. Liquidity in Southeast Asia is still good and some pockets will see a rise of interest but not drastically. "Malaysian and Singaporean rates will, however, remain low in comparison," he said.
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