Central Asia Markets Face Pressure from Rising Global Interest Rates

The global cost of capital is increasing due to rising government bond yields in developed economies. The yield on 10-year US Treasury bonds is around 4.8%, while Japan's 10-year government bonds exceeded 3% in September for the first time in three decades.

The main reason behind this trend is inflation risks, high oil prices, large volumes of government borrowing, and expectations of tighter central bank policies. In Japan, an additional factor is the normalization of the Bank of Japan's monetary policy.

This will lead to a reassessment of risk in global debt markets. Investors will demand a larger premium from emerging-market bonds, resulting in higher interest rates for new borrowers and a decline in prices for existing bonds.