MANILA - Bond markets in emerging East Asia expanded by 8.6 percent on year to $5.9 trillion in January to June on the back of a double-digit growth in the region's corporate bond markets, according to a report released by Manila-based Asian Development Bank (ADB).

In the latest edition of the Asia Bond Monitor, the ADB revealed that as of end-June, there were $2 trillion in corporate bonds or 15.2 percent higher than a year earlier. The government bond market grew by only 5.5 percent on year to $3.9 trillion.

"Corporate bond growth continues to outpace government bonds as lower yields and tighter bank lending ahead of new bank regulations in many markets encourage firms to raise funds from local markets," the report read.

The ADB, however, cautioned that the robust growth of emerging East Asia's local currency bond markets is being threatened by the sovereign debt crisis in Europe and the economic woes of the United States.

"Emerging East Asia's local currency bond markets are emerging as a safe haven in the midst of the crisis, but we should not be complacent," said Iwan J. Azis, head of ADB's Office of Regional Economic Integration.

Azis said the global economic outlook dims are risks to local currency bond markets in the region amid volatile capital flows due to additional stimulus and worsening investor sentiment.

The ADB noted that yields edged up in July and August for all tenors in China, Indonesia, and Vietnam as uncertainty in financial markets and the real sector deepens.