Promoting Liquidity in Domestic Bond Markets

Keynote speech by Mr Malcolm Knight, General Manager of the BIS, at the Government Borrowers Forum held on 23-25 May in St Petersburg.

Extract

Domestic bond markets - by which I mean the markets for domestic debt securities issued by residents of a country in its own domestic currency - have experienced impressive growth since the late 1990s, especially in emerging market economies. Yet this growth has not been accompanied by a commensurate increase in market liquidity. Today I will first discuss some of the reasons for this lack of liquidity. Then I want to draw upon the recent experience of various countries to offer a few practical ideas for improving this situation. I shall conclude with some remarks about the Asian Bond Fund 2, which I see as an important recent initiative to reduce impediments and boost liquidity in the emerging domestic bond markets of Asia.