The Development of Local Debt Markets in Asia

IMF Working Papers, June 1, 2011

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Market development in emerging Asia has been limited by hurdles confronting borrowers and lenders.
Current and potential liquidity providers face constraints that limit market depth.
There is insufficient support from government policies and regulations to foster deeper local debt markets.
A shortage of financial assets suitable as underlying collateral constrains the expansion of fixed-income markets and domestic and regional investment opportunities.

Critical size is a major issue for local debt market development.
Fragmented national markets reduce scale, efficiency, and access for investors and issuers.
The absence of a strong credit culture impedes the mobilization of domestic investor bases and the diversification of funding sources.
Market infrastructure gaps (including repo market, swap market, and securities trading capabilities) constrain liquidity and market stability.

Foster a credit culture to deepen local debt markets.
Address critical size through an integrated regional market for local currency bonds to provide greater scale, efficiency, and access.
Strengthen government policies and regulatory frameworks to better support borrowers, lenders, and liquidity providers.
Develop financial assets that can serve as underlying collateral to expand fixed-income markets and enable broader domestic and regional investment opportunities.

Bonds; Corporate bonds; Emerging and frontier financial markets; Financial institutions; Financial markets; Securities; Securities markets.
Emphasis on: local currency debt markets, market liquidity, market infrastructure, repo market, swap market, investor base, interest rate, market stability, regulatory framework, increase financial market integration.

IMF Working Paper — The Development of Local Debt Markets in Asia

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