South Africa was the only country in sub Saharan Africa to issue on international bond or equity markets in 1997.

How Scary Is the Bond Market?

On international financial markets, the war in Georgia has rendered Russian debt and bonds toxic. Interest rates on Russia s bonds have risen by 2 3 percentage points, and many Russian creditors no longer have access to international capital markets.

The bonds carry market interest, but the State guarantee is equivalent to a subsidy.

Likewise, the development of bond markets has been gaining attention in a growing number of developing countries in all regions, though in many places bond markets are relatively new.

The US sovereign debt market shows no similar evidence of having reached a limit yet. But bond markets do not issue many early warning signals witness the sudden run up of yields in Italy and Spain a year ago.

However, since the dynamics of domestic currency bond markets are linked to external bond markets, they are not immune to external volatility, and recent experience calls into question the effectiveness of local capital markets as a buffer against external volatility, particularly for a country considered as a high credit risk.

National Governments may also be able to enhance local authorities' direct access to capital markets, domestic and international, by granting authority to municipalities to issue infrastructure bonds.

11 The Asian Bond Market Initiative was endorsed at the ASEAN 3 Deputies Meeting held in Chiang Mai in December 2002. Its objective is to develop efficient bond markets in Asia.

DUBLIN Bond markets are notoriously fickle, often driven by sentiment rather than rigorous macroeconomic analysis, and, as the 2008 global financial crisis demonstrated, they are far from infallible. They can also be particularly unreliable when assessing an economy s long term prospects.

The broader use of gross domestic product (GDP) and commodity price linked bonds in international markets would serve the same purpose.

Surprisingly, the bond market still seems almost oblivious to this risk. But holders of US debt worldwide have every reason to be concerned.

The Asian bond market and Asian bonds are thus mechanisms for financing for development that also promote greater regional economic stability.

For example, the Republic of Korea has undertaken measures to encourage the issuance of bonds by SMEs.10 One objective of the Asian bond market initiative11 is to increase bond financing options for smaller companies in Asia.

Governments and international financial institutions could consider providing bond guarantees to those municipalities.

When the US housing market started to turn south, the biggest underwriters (such as Countrywide) did not go bankrupt right away, because they had sold the vast majority of their loans to the CDO market. Eventually, however, the uncertainty created by these CDOs nearly brought down the entire US banking system.

Developing countries are increasingly financing their infrastructure through international capital markets, a trend reflected in the growth of their commercial bank borrowing and their increased use of bond and equity markets.

In the bond market, since June, due to the influence of multiple factors such as fundamentals and investor sentiment, the bond market has taken on a trend of improvement.

Local currency government debt markets have performed fairly well during the crisis, while local currency corporate debt markets have played a more modest role as a vehicle for longer term finance. This suggests that domestic reforms aimed at reducing issuance costs, improving disclosure requirements, enhancing creditors rights frameworks, and tackling other inhibiting factors could bring high returns.

In addition to providing more stability, bond markets are expected to stimulate domestic savings and investment.

European banks remain balkanized, with a patchwork of national regulators seeking to promote their own champions. European governments debt may all be denominated in euro, but German and Italian debt are hardly the same thing, so the government euro bond market lacks the depth and liquidity of the US Treasury Bill market.

Debt markets would also benefit from such an initiative. Blurring the line between the private and the state owned sectors would, over time, reduce the latter s privileged access to and overuse of bank financing, leading to the expansion of corporate bond markets.

The members of the Association of Southeast Asian Nations and China, Japan and the Republic of Korea (ASEAN 3) and the Asia Cooperation Dialogue are considering developing the Asian bond market.

Moreover, a consortium might not have access to the financial market for the purpose of raising funds, where only corporations are authorized by the law to issue negotiable instruments and securities such as stocks, bonds and debentures.

Griesa, for his part, showed no compunction about upending a financial order in which market based exchanges of old bonds for new ones are used to restructure the debts of countries unable to pay. By making it impossible for sovereigns to restructure, he effectively rendered them unable to borrow in the United States.

Sovereign obligations, such as bonds, are commonplace in the capital markets, and demonstrate strong investor demand and confidence.

Pushing up asset prices and pushing down the euro s exchange rate will require the ECB to buy bonds on the secondary market not the crisis countries bonds per se, but those of all eurozone members. In other words, it will require quantitative easing.

Yes, financial markets in troubled countries for example, Russia s currency, equity, and bond markets have been negatively affected. But the more generalized contagion to global financial markets that geopolitical tensions typically engender has failed to materialize.

The stock market s recent performance often is attributed to the unconventional monetary policies that many central banks have been pursuing. These policies, by design, lowered the return on sovereign bonds, forcing investors to seek yield in markets for higher risk assets like equities, lower rated bonds, and foreign securities.

The solution suggested by the Governor was to borrow about 400 million on the bond market to offset the deficit.

We see ever growing support for the proposal to develop an Asian bond market, which I put forth in 2001.

38 For example, through strengthening institutions that provide long term finance, such as development banks and, where appropriate, bond markets.

The asset prices of emerging markets benefit from the loose expectation rally brought by the slow interest rate hikes of the Fed. It is better to actively grasp the investment opportunity of stock market and bond market under this environment.

Moreover, including a smaller number of Member States in the set aside mechanism would facilitate consideration of any United Nations bond offering by market participants and would probably prove easier and less costly for the bond trustee to administer.

The development of stock exchanges has also been given priority in many countries, but next to the banking system and the potential benefits of domestic bond markets, stock markets are of relatively marginal importance for development, especially for the development of small and low income economies in the early stages of financial development.

Finland has achieved new levels of sophistication in housing finance by introducing a system of securities through which the National Housing Fund has been able to enable funds to be obtained from the international market.

The CDO market, however, was concentrated six or seven issuers controlled most of the market, and this market ended up representing 50 of the entire revenues to be gained through ratings. All of a sudden, issuers had much more influence on the rating agencies, which, like any good seller, were ready to bend a little not to alienate important customers.

In 1997, Argentina, Brazil, Ecuador, Panama and Venezuela retired 10.4 billion of collateralized Brady bonds through swaps against uncollateralized long term bonds, effected at a discount based on secondary market prices.

The Fund apos s bond portfolio was helped by its overweighting in United States and United Kingdom bonds and an underweight position in yen bonds.

3 Trade securities or maneuver securities market with insider information

The inflation indexed bond markets were not well developed in the 1980 s. But we do know that in 1984 the best developed such market (in the United Kingdom) was quoting long term real interest rates of only around 3 far below the IMF s figure.

Local bond markets provide alternative sources of financing for companies and Governments, which avoid exchange rate risks inherent to foreign financing.

(iv) The growth of domestic capital markets, particularly in developing countries, and its relationship with foreign portfolio investment.

Weak Labor, Strong Securities Markets

Moreover, market volatility of portfolio investments was not a serious problem in Africa (especially in equity markets in Egypt and South Africa), particularly when compared to other markets.