This fund commenced operations last July.2 The second and more difficult, but more fundamental, step will be the creation of ABF II, to invest in local currency-denominated sovereign and quasi-sovereign bonds in the region. Progress in developing the overall structure of this fund is well-advanced. The EMEAP central banks are now in the process of detailed study of design.
As it happens, there was earlier today a press release informing markets and other observers of progress.3 While this work obviously adds slightly to demand for Asian bonds, the objective is not to lower artificially the funding costs for governments in the region by trying to divert major sums of central bank or other official money.