Bond markets in emerging East and Southeast Asia expanded 7.0% to 5.7 trillion U.S. dollars in 2011, driven by double-digit growth in the region's corporate bond markets, according to the newly released Asia Bond Monitor by the Manila-based Asian Development Bank (ADB).

"Corporate bonds should continue to grow over the next few years with banks preparing for higher capital requirements, companies seeking funding for expansion as the region's robust growth continues, and with strong demand from domestic institutional investors particularly pension funds and insurance companies," said Iwan J. Azis, Head of ADB's Office of Regional Economic Integration.

The latest edition of Asia Bond Monitor showed that in 2011, the amount of outstanding government bonds grew by a modest 2.5% in local currency terms to 3.8 trillion U.S. dollars. The growth rate reflected a drop in bond sales by both governments reining in fiscal stimulus programs and by monetary authorities curtailing issuance in the early part of the year.

Meanwhile, outstanding bonds sold by banks and companies expanded by 17.1% to 1.9 trillion U.S. dollars. This was slower than the growth rates in 2009 or 2010 but much higher than in the middle of the last decade. The pace of corporate issuance accelerated in early 2012, suggesting a swift pace of growth this year too. Indonesia's corporate bond markets grew the fastest at 28.0%, followed by 26.0% growth in China, and 13.4% in the Philippines.

The region's contractual savings institutions pension funds, insurance companies, and social securities institutions have become increasingly important buyers of the region's corporate bonds. Their demand is also set to increase as they seek higher returns and longer-dated investments than are available from government bonds, the report said.

Foreign interest in the region's local currency bonds remained strong in most markets in 2011.

According to the report, the fastest growing markets in the region in 2011 were those of Vietnam, Singapore and Malaysia, which grew by 16.5%, 13.1%, and 10.4% respectively.