Appendix A. Selected Case Studies
Appendix B. Survey Results
A recent IMF-World Bank survey assessing the current stage of local currency bond markets (LCBM) development was sent to country authorities to capture common challenges faced by developing countries and to identify potential areas of focus in market development strategy. The survey was answered by the debt management authorities (the monetary authorities for certain money market aspects) of 32 countries—10 in Europe and Central Asia, 10 in Latin America, 7 in Sub-Saharan Africa, and 5 in other regions. The survey results are presented below, organized by the key building blocks.118
Overall, the survey highlighted many structural issues, indicating the long-term nature of the development process of government LCBMs. These issues include the lack of a diversified investor base, the concentration of the banking sector, and the structural excess liquidity in the banking system that are perceived by many countries as important challenges. Also, the top three concerns for the secondary market relate to the investor base (see the heatmap in figure B.1). Addressing structural issues is an important element, but it requires time as well as concerted and coordinated efforts from multiple government entities.
In the meantime, authorities could undertake several policies to help. For instance, policies related to the maturity profile or types of instruments could be implemented in the short term. Also, actions to reduce operational and settlement risks may be easier to implement than structural measures.
It is useful to look at the survey answers using income level and regional breakdowns. Most countries, even at different income levels, consider that developing the investor base and the secondary market are the most challenging factors. However, when looking at the regional breakdown, it is noted that authorities in Latin America and Sub-Saharan Africa considered that the challenges related to market infrastructure and the legal and regulatory framework are as important as those involving the investor base and the secondary market, while in other regions, they did not (figure B.1).
The survey also allows the identification of challenges for each of the building blocks:
Appendix C. Stylized Cases
Appendix D. LCBM and Financial Stability
A deep and liquid government bond market can enhance financial stability by better absorbing occasional market “stresses” that cause extreme price fluctuations and by limiting the financial distortions that increase systemic vulnerability (BIS 2007). An illiquid market can amplify the effect of shocks by generating large price changes, unstable price expectations, and a greater risk of spillover to other market segments. Illiquid markets during periods of heightened market uncertainty can adversely affect financial stability by reducing both agents’ capacity to manage risk and the authorities’ ability to monitor risk. Liquid markets with a diversified investor base are less likely to witness one-way price bets than markets that are relatively illiquid. In general, emerging market and developing economies are more concerned than advanced economies about the resilience of the government bond markets.
Some of the measures to address market liquidity during market stress conditions could include changing the volume of securities available through securities lending programs and amending collateral policies that influence liquidity premiums (King and others 2017). When markets have frozen, central bank direct intervention in markets through outright purchase or sale of securities can remove some of the underlying financial risk and help restore price discovery (IMF, 2017). Similarly, simultaneous auctions of primary market issuance and buy-back or exchange operations that facilitate free entry and exit from markets can also help recover price discovery. When securities dealers face funding constraints, liquidity provision by the central bank through lender of last report–type operations could also be useful to dampen the impact of market stress.
For countries with significant foreign participation, shifts in international monetary or financial conditions may in some instances lead to sudden nonresident sales of local currency bonds, which could have a disruptive effect on the exchange rate. Most advanced economies and emerging market economies are concerned about the potential volatility from increased foreign investor holdings of government securities (BIS 2019). The stability of foreign investors in domestic bond markets of emerging market and developing economies depends crucially on the behavior of their exchange rates (Chan, Miyajima, and Mohanty 2012). Perceptions of exchange rate misalignment may result in currencies becoming more volatile in response to a new shock than they would be otherwise, a condition which may amplify domestic bond sales by nonresident investors. Greater exchange rate flexibility and deeper derivatives markets for hedging currency risk by foreign investors are therefore essential for safeguarding financial stability related to domestic bond markets (Chan, Miyajima, and Mohanty 2012). Having a well-diversified domestic institutional investor base can help as a useful offsetting stabilizing force in terms of countering the impact on bond yields from reversal of nonresident flows from the domestic bond market.
Appendix E. Primary Dealers
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Jonasson, Thordur, and Michael Papaioannou. 2018. “A Primer on Managing Sovereign Debt-Portfolio Risks,” Working Paper 18/74, International Monetary Fund, Washington, DC.
King, D., L. Brandao-Marques, K. Eckhold, P. Lindner, and Diarmuid Murphy. 2017. “Central Bank Emergency Support to Securities Markets,” Working Paper No. 17/152, International Monetary Fund, Washington, DC.
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FIRST is a multi-donor grant facility that provides short- to medium-term technical assistance to promote sounder, more efficient, and inclusive financial systems. FIRST is currently supported by five donors: the Department for International Development of the United Kingdom (DFID), Germany’s Federal Ministry of Economic Cooperation and Development (BMZ), the Ministry of Finance of Luxembourg, the Ministry of Foreign Affairs of the Netherlands (MFA), and the State Secretariat for Economic Affairs of Switzerland (SECO), as well as the World Bank Group and the IMF.
This document benefitted from comments from the following external experts as well as IMF and World Bank staff: Alessandro Scipioni, Bill Cox, Bill Northfield, Gregory Ambrosio, Guido Della Valle, Ian Storkey, Joanne Perez, John Gardner, Laszlo Buzas, Mike Williams, Phillip Anderson, Patrick van der Wansem, Robert Andreoli, Thomas Olofsson, and Xavier Werner, Andre Proite, Diego Rivetti, Lars Jessen, Leandro Puccini, Amina Lahreche, Amr Hosny, Bo Zhao, Celine Rochon, Cory Hillier, Cristina Cuervo, Dan Nyberg, Emre Balibek, Evridiki Tsounta, Estelle Liu, Geerten Michielse, Jad Khallouf, Larry Cui, Luiza Zanforlin, Miriam Tamene, Narayan Suryakumar, Obert Nyawata, Richard Stobo, Rina Bhattacharya, Ruchir Agarwal, Sandeep Saxena, Yibin Mu, Wouter Bossu.
IMF World Economic Outlook database and Bank of America Emerging Market Local Markets Guide.
In the context of this note, strengthening of LCBMs refers to the goal of increasing the share of marketable local currency government bond securities in the overall debt portfolio of the central government, in the context of a transparent primary market and growing activity in the secondary market.
Appendix D briefly discusses the implication of a more developed domestic market on financial stability.
The building blocks are money markets, primary markets, secondary markets, investor base, financial market infrastructure, and legal and regulatory frameworks.
The 12 countries are Bulgaria, Colombia, Costa Rica, Croatia, Indonesia, Kenya, Lebanon, Nicaragua, Pakistan, Sri Lanka, Tunisia, and Zambia.
Guide to the Government Securities Market Development Toolkit for Low-Income Countries – Finance and Markets Global Practice (GFMDR) World Bank 2014.
Financial dollarization/euroization occurs when domestic residents of a country can keep foreign currency deposits (US$, EUR) in banks and borrow in foreign currency from those banks. The share of bank deposits (loans) in foreign currency in total bank deposits (loans) is a common measure of the degree of financial dollarization/euroization.
For foreign investors, low convertibility also poses an additional burden.
Although in some countries the central bank may have higher capacity and closer contact with market participants.
Refer to “Developing a Medium-Term Debt Management Strategy Framework (MTDS)–Updated Guidance Note for Country Authorities” (IMF and World Bank 2019).
For some indicators under the different building blocks as well as in the “enabling conditions” section, questions may require detailed judgement by the evaluator and some degree of subjective assessment may be needed (particularly in the case of self-assessments). To reduce the risk of misjudgment and facilitate an objective and consistent cross-country comparison, thresholds will be defined based on the first few pilot cases where assessments are conducted by the IMF and World Bank teams.
For the investor base building block, stage four represents the state of functionalities observed in emerging market economies that are at a more advanced stage of market development.
For the purposes of this assessment, money market segments relate to certificate of deposit and commercial paper issued and traded by financial intermediaries. Foreign exchange derivatives and interest rate derivatives are discussed in the “Investor Base” and “Secondary Market” sections, respectively.
A “repo” (or sale and repurchase agreement) is the sale of securities tied to an agreement to buy them back later. A reverse repo is the purchase of securities tied to an agreement to sell back later. These transactions normally take place among financial intermediaries, A repo is best thought of as a collateralized loan or investment. Because a repo minimizes counterparty credit risks, it became more widely used after the global financial crisis.
A liquid money market is one with an active secured and unsecured money market segment in which price transparency and trading volumes are robust enough to support market agents in terms of investment, trading, and risk management activities.
Central banks use collateralized transactions for short-term liquidity provision and absorption operations. The collateral typically used by central banks is either foreign exchange (cash) in foreign exchange swaps transactions or government/central bank securities in repo transactions, or both.
Market makers need to hold a certain level of liquid inventories (for example, stock of government securities sold by investors) for their business. With the use of repo markets, they can borrow money to hold inventories, while selling securities that they do not hold by borrowing them. In general, repos are a more stable and cheaper funding source than unsecured borrowing, as they are flexible and minimize counterparty credit risks.
The haircut, or the margin applied to repo transactions, takes into account the risk that collateral will not realize the full value of the transaction, and the haircut depends on the maturity, quality, scarcity value, and price volatility of the underlying collateral; the term of the repo; and the creditworthiness of the customer.
An inflation targeting (IT) framework uses interest rates as an operational target, and an exchange rate targeting framework typically uses exchange rates and interest rates as operational targets. A monetary targeting (MT) framework uses reserve money as an operational target and, at least in theory, does not require active money markets for monetary policy operation purposes. Countries that transition from an MT framework to an IT framework typically must develop money markets quickly to enable market-based operations.
A transition from an MT framework to an inflation targeting framework requires central banks to adjust the composition of liabilities and pay market interest rates as opposed to holding large balances of required reserves that are not remunerated. Central banks with large balance sheets might accumulate losses as revenues from assets (for example, foreign interest rates) that typically are lower than expenses for liabilities (for example, domestic interest rates).
Proper management of excess liquidity implies that excess reserves are remunerated at the market rate.
High levels of reserve requirements tend to reduce the need for banks to adjust liquidity positions in money markets. Most countries do not pay interest on reserve requirements.
The reference rates of very short tenors (typically up to two weeks, but in some markets only one day) tend to be more reliable because they are underpinned by higher market liquidity.
A repurchase agreement transaction is structured as a sale and repurchase of securities in legal terms, although economically it is a collateralized borrowing. This could pose complicated legal challenges. The Global Master Repurchase Agreement is governed under English law and the Master Repurchase Agreement is governed under New York law.
Also, they enhance the operational efficiency of trade negotiations, margin provisioning, and post-trade payment and collateral management.
Investors in several countries without robust legal framework for repo transactions use sell/buy backs to achieve similar functionalities to those of repos—these transactions are less efficient, more costly, and do not achieve the same legal and financial outcomes.
An external legal opinion concerning the enforceability of the legal transaction is particularly important to the foreign investor.
Domestic debt in this guidance note is defined as debt issued in local currency in the local market. Local market is defined by the jurisdiction of issuance and not by residency of holders.
A yield curve—also known as the term structure of interest rates—illustrates the relationship between maturities and yields of government securities.
A cap on the interest rate set by the issuer in auctions is a form of nonmarket-based pricing.
Types of placements include (a) auction: the predominant placement technique used by governments because of transparency and cost benefit; (b) syndication: used when the demand is uncertain (case of new issuances); (c) private placements: government issues securities, generally with specific characteristics, directly to an investor or a g roup of investors; and (d) tap sales: the government defines the characteristics of securities to be sold and the period to accept bids. They can be sold at a minimum or fixed price, depending on the demand.
Issuance on a tap basis as used here is when prices are determined unilaterally by the issuer. It should be noted that it is different from tap mechanisms used in an auction framework, which give investors access to noncompetitive subscriptions.
Market liquidity can be assessed with the turnover ratio (trading volumes divided by the total size of the securities outstanding), the average transaction size, and by the bid-ask spreads. In cross-country comparisons, it is important to note that the definition of trading volumes is not uniform across countries (for example, some countries publish the sum of the reported volumes by sellers and buyers, and other countries adjust the reported volumes by taking an average. Some countries also include repo transactions as well as outright transactions in their reports).
Benchmark bonds are usually fixed-rate bullet bonds for key maturity sectors, which are the most appropriate instruments to build a yield curve and tend to attract a wide range of investors with different motivations and investment time horizon. Variable-rate and inflation-indexed bonds could be used as a transitional strategy to initiate fixed-rate securities where macroeconomic stability is an issue, which reflects a rigid and high inflationary expectation. Furthermore, in some countries, variable-rate and inflation-linked securities are also financing instruments, but they tend to have much lower liquidity.
As the local market develops, the required level of cash buffer tends to be reduced, emphasizing more the efficiency of holding cash buffers.
For those countries without a national currency, the foreign currency used can be seen as the national currency for the sake of this indicator.
Remaining maturity, rather than original maturity. In case central bank fiscal financing is widely used , ATM might not represent the ability of the government to issue long-term debt. Adjusted ATM considers the maturity of central bank debt to finance government securities purchases.
According to BIS debt securities statistics, all countries (30 countries) reported the ATM (the average over 2014–2018) above 3 years, while 25 countries reported the ATM above 5 years.
According to the Debt Management Performance Assessment tool (DeMPA), DPI-11.1 definition of cash flow forecasting and cash balance management.
Tight bid-ask spreads signify very small differences between the highest price that a buyer is willing to pay and the lowest price that a seller is willing to accept—this mainly is due to ample liquidity and high volumes of trading, and consequently strong price competition on both the buyers’ and sellers’ side.
This guidance note considers a PDs system and market making as interchangeable.
The two-way quotes are usually mandatory for on-the-run benchmark bonds and could be extended to other bonds with market capacity of the PDs.
The interest rate derivatives market also enables investors to adjust interest rate exposures with low cost, strengthening their capacity to invest in long-term bonds. Though short selling provides liquidity and is essential for dealer risk-management purposes, it may, at times, amplify volatility, particularly in less liquid markets. Short selling is categorized into covered and naked short selling. Covered short selling happens when government securities are bought or borrowed in the exact quantity to cover the short position. Also, a securities lending facility is an alternative to cover short selling. Naked short selling occurs when government securities are sold without first borrowing the securities or ensuring that they can be borrowed. In general, covered short selling is permitted for market-making purposes, while naked short selling is less usual.
An appropriate secondary market-trading framework requires the presence of investors with different investment profiles, particularly non–buy-and-hold investors. Efficient financial market infrastructure, regulatory regime, tax systems, and dematerialized government securities are required. At advanced stages, securities lending facilities improve the quality of market making.
This supplementary indicator should be interpreted with a large margin of error. Because of data limitations, the indicator does not control for the size of individual transactions, which could significantly affect the level of bid-ask spreads. The sample of countries for which data is available is also limited to only advanced economies and some emerging market economies.
Banks tend to trade securities for liquidity management purposes, which helps bolster secondary market activity. A high concentration of the banking sector tends to become a binding constraint for market liquidity in developing countries with smaller banking systems, although it is not always the case for those with a large financial system.
Some central banks of emerging market and developing economies have facilitated financing to government in various ways over recent months following the market volatility of March 2020 and the higher fiscal needs driven by the pandemic. Central banks with more policy credibility have had the most room to perform this role although most market participants expect these arrangements to be only temporary.
These legislative prohibitions or limitations are typically included in the “organic” central bank law.
Countries that do not meet these conditions typically issue international bonds denominated in a global reserve currency in the international capital market.
For instance, the lack of sophistication or high concentration in the banking sector undermines banks’ incentives to trade.
The tax system should be equitable and broadly neutral across all types of investors (see Building Block 6 for further discussion). A neutral tax treatment of all types of financial institutions requires the abolition of double taxation of savings in mutual funds, pension funds, and life insurance. Similarly, investors who invest through investment funds, mutual funds, and pension funds should not be put in a worse position than if they had invested directly. The simplification of the tax regime for government securities, including removing stamp duties, preferent ial treatment across different types of investors, and transaction taxes is often critical. Accounting and valuation rules pose an important interaction with the tax system because, for example, repurchase transactions could trigger valuation gains. Mark-to-market rules and the use of available-for-sale portfolios are particularly important for creating the proper regulatory structure to allow for secondary market development because the inability of investors to sell their holdings in the market could discourage investors from holding medium- and long-term securities.
Liquidity regulations of banks as well as investment requirements of pension funds and insurance companies can create an artificially stable demand for government bonds. When these requirements are presented at high levels, taking into account prudential aspects, a hold-to-maturity investment pattern emerges because captive investors can only sell their assets in the secondary market at a loss. Public sector institutions can exhibit a similar investment behavior, which undermines the price discovery function of markets and impedes secondary market development.
Government securities auction systems are included as FMI systems for assessment purposes because it is becoming common for developing countries to acquire integrated systems that include government securities auction systems.
Dematerialization of government securities is the move from issuance in the form of physical certificates to electronic bookkeeping by depository.
The system rules of the FMIs should clearly define at what point the payment and securities transfer is final. In many countries, specific legislative provisions are required to ensure that this “finality” is not put at risk by application of insolvency and other laws.
The risk that trade settlement fails and the price to replace the bond has increased.
Issued by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.
The over-the-counter market can deliver more immediate liquidity through repo and the outright sale of a security. It should be noted that DVP2 and DVP3 net settlement is more efficient than DVP1 settlement, which requires more cash/securities to settle individual gross obligations than if the combined transactions are “netting .”
Except for nontradable securities issued to the central bank and other government-related agencies.
A judgment on the system owner’s reputation, objectives, and financial capacity will have to be made by the reviewer. Adequate capital should be based on the size and on the liabilities of the CSD. The capital should be higher if the CSD acts as CCP or provides lending/credit to participants. Capital for a CCP should reflect its exposures to counterparty failure.
Yes, for a central bank unless there have been very recent obvious cases that discredit the central bank.
The answer is yes for a central bank but only a guide for CSD/CCP that are 100 percent government agencies. For nongovernment FMI owners, the capital should be assessed against the nature and risk profile of their operation (for example, Does the FMI include equities? Is FMI a CSD or CCP? What parent guarantees are there?).
Cost recovery may include a “reasonable” return on capital.
We have assumed that a securities lending facility can be substituted with a repo agreement.
Predeposit cash, predelivery security, or both reduce the settlement efficiency and liquidity and increase the cost of the trading and of the market making. They do however reduce the settlement risk.
For the purpose of this assessment, some regulatory issues that affect the functioning of broader capital markets (for example, prudential regulations, internal risk control systems of intermediaries, and business conduct rules) are not discussed here. Disclosure of material information is discussed in the primary market and the secondary market building blocks (governments as sovereign issuers are exempt from statutory regulations).
The principles of the International Organization of Securities Commissions set important guidelines for the legal and regulatory framework of the securities markets. A deeper assessment on these topics might benefit from a more thorough analysis of the principles.
The legal issues related to payment finality and dematerialization of securities are discussed in the FMI building block. The investor base building block discusses how a CIS contributes to LCBM development. Tax issues related to repo transactions and buy-and-hold investment behaviors are discussed in the money market and investor base building blocks, respectively.
Debt management functions are, in some cases, executed by multiple institutions.
For further discussion, see International Organization of Securities Commissions principles 24, 25, 26, 27, and 28.
They should include the tax treatment of gains on secondary sales, as well as repo, securities lending, financial collateral, and derivative transactions.
A similar box and further information are provided in a 2020 IMF working paper by W. Bossu, C. Hillier, and W. Bergthaler titled “Local Currency Bond Markets Law Reform: A Methodology for Emerging Markets and Developing Economies.”
Once the framework is tested in practice, it will be possible to better define whether different weights should be assigned to each indicator to derive the final stage for the indicator. At a later stage, an excel worksheet may accompany the framework to facilitate the calculation of the stage of development for each building block.
Further work could also include refining the calibration of the parameters, as well as identifying the appropriate peer groups.
The uniform price auction format could be the initial choice and later switched to multiple price auctions as the primary market gains experience in the bidding process.
The same solution could be applied for countries facing high financial dollarization.
The use of linkers could be strategically considered only if such products serve as a credible signaling mechanism that bolsters the authorities’ commitment to manage and contain future inflation.
Though reopening of the security as a benchmark security for a specific maturity could be stopped after a certain period, debt managers could take the opportunity to continue its reopening over a different maturity as it rolls down the yield curve,
This should be complemented with an assessment of auction results for the degree of competition in the market, and if there is potential for price distortion.
The T-bill issuance program at a subsequent stage should support and complement the benchmark building program. Adjustments in the issuance volume of T-bills may be required to accommodate regularity in bond issuance because markets tend to more easily absorb fluctuations in the volume of short-term instruments. With better capacity to manage refinancing risks, the reopening of T-bills can increase their potential size and liquidity, further entrenching the short end of the yield curve.
End investors are attracted by syndications because they have a greater certainty of being allocated bonds and have relatively greater assurances that the bond will be liquid because of the larger size of issuances. Syndications allow the issuer to have direct input into investor allocations and allow for a broad allocation across the investor spectrum, including trading accounts and long-term investors. Syndications result in a greater share of investment in trading accounts compared with auctions, which further enhances the bonds’ liquidity. At the same time, tight quoting obligations for primary dealers who are usually mandated as joint lead managers for the syndication help to establish firm prices for the security in the secondary market.
The minimum size of individual lines of securities necessary to foster liquidity is market-specific and depends on the portion of the outstanding volume likely to be held in trading portfolios and its status as an on-the-run benchmark. Also, it may be influenced by any internal limit that institutional investors may have on the proportion of outstanding volume of a single security or the minimum size requirements for a security that can be traded on an electronic trading system (for example, Euro MTS). At the extreme, the minimum size could be determined to attain the threshold size required for inclusion in global bond indices.
Allow short selling to support market liquidity, pricing efficiency, and enabling more effective risk management. However, concerns with systemically unrestricted short selling activities that could result in fraud, abuse, or market collusion that could in turn endanger market instability may require the authorities to ban uncovered short sales, which will tend to reduce bond liquidity in the cash market. It will be especially important to allow short selling by primary dealers to support their market-making activity.
Public pension and provident fund schemes that adopt a pay-as-you-go model (which is unfunded) do not contribute to demand for government securities.
In an exempt/exempt/taxed (EET) system, (a) contributions are not taxed; (b) pension fund income is exempt; and (c) pension fund payouts are taxed (both pensions and lump sums). This system typically operates as a deferral system with the tax on contributions and pension fund income deferred until payout. The advantage of an EET system is that savings can grow at a faster rate when compared with normal bank savings (which typically operate under a taxed/taxed/exempt; TTE system, with deposits made out of taxed income, interest income taxed, and withdrawals untaxed).
Objectives of LCBM reform could be, but are not limited to (a) increasing the local market capacity to provide funding to the public sector; (b) making price discovery more efficient; (c) broadening the investor base; (d) strengthening the monetary policy transmission mechanism; (e) facilitating banks’ liquidity management (and increasing financial resilience); and (f) increasing the sources of funding for the private sector.
Private sector participation could be less intensive (that is, through the participation in a consultative board, if not as a member of the working group).
Peer countries can be identified using the Global Financial Development database developed by the World Bank, based on GDP per capita and population size measures.
Activities and outputs in the first year may be specified in more detail than those in later years, which will depend on earlier achievements and evolving circumstances.
It replaced the previous Decree 01 as of July 1, 2018.
The securities lending facility is called liquidity support in the Vietnamese legislation.
Issued in 2018 and 2019.
Clearstream securities depository, https://www.clearstream.com/clearstream-en/products-and-services/market-coverage/europe-non-t2s/georgia/market-link-guide-georgia-1281410.
The system was developed by an international software vendor of FMI infrastructure systems.
This is more difficult to achieve between multiple standalone CSD and central bank settlement systems.
Often there are policy differences between the access requirements for the public and private CSDs.
DVP1 is the default model for government securities and DVP1 and DVP3 are used by the GSE.
External borrowing includes non-resident holdings of domestically issued securities as domestic debt.
Ad hoc T-bills had a maturity of 91 days but could be cancelled at any time, even before the maturity period, if warranted by the government’s cash position. The ad hoc T-bills were converted into special securities at their redemption date.
Although the ways and means advances arrangement formally replaced the ad hoc Treasury bills mechanism in 1997, the process was initiated in 1994.
In more specific terms, an auction system for price discovery was introduced in 1991. Subsequently, in 1993, 91-day T-bills were introduced for managing liquidity and benchmarking. A historic agreement was signed between RBI and the government on the net issuance of ad hoc T-bills. Net issuance of ad hoc T-bills was progressively brought down from its high of over 38 percent in the early 1990s to 18 percent at the end of 2019.
From 6.5 years in FY1998 to 8.9 years by FY2003 and further to 10.6 by FY2018.
Western African Economic and Monetary Union (WAEMU) countries include Benin, Burkina-Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. They share the same currency, the CFA franc, which is pegged to the euro, the regional capital market, and regional financial authorities, including the WAEMU central bank. Each country develops and implements its own borrowing program. Investors in any WAEMU country can purchase securities issued by any WAEMU government.
The World Bank supported implementation of the ETP, including by advising the government on suitable models based on international best practices and the domestic context, supporting the National Treasury in reaching consensus between different stakeholders, advising on the institutional arrangements that could govern the platform, defining the core functionalities of the platform, designing the settlement model, and defining the principles guiding the platform bylaws.
Originally, trades were reported as morning and afternoon sessions.
Original operating in 1994 as the Thai Bond Dealers Club, it changed it’s name in 1998 to the Thai Bond Dealing Center.
Ministry of Finance government securities in the primary market are exempt and automatically registered.
Updated to a 30-minute reporting window from time of trade execution in 2012.
Since 1999 when the MOF became an active issuers of government securities
Interpolated pricing for illiquid bonds.
The survey reflects views of the country authorities and may not capture the perspectives of the private sector. It may also not accurately represent a global picture, given the low response rate from some regions (Asia and the Middle East/Northern Africa). Because this is the first survey conducted on the topic, no analysis on progress from previous years is implied here.
For countries near the borderline between stages, it is likely that the policy effort could span more than one stage within and across building blocks.
The interbank repo market should be supported by an appropriate legal structure that resembles classic repos and protects the lender’s claims on collateral in the event of default.
There are several requirements for a well-functioning primary dealer system. These include (a) stable macroeconomic conditions, (b) appropriate legal and supervisory systems, (c) an adequate payment system, (d) liberalized interest rates (the government must be committed to a market-based mechanism, (e) a stable, predictable, and transparent issuance policy (the government must be committed to transparent debt management practices), (f) a large and diversified investor base, (g) a market large enough to support a sufficient number of PDs to ensure competitive behavior, (h) sufficiently large outstanding debt to create liquid issues, (i) the debt
The framework developed in this note can be used for this purpose. The development stage of the different building blocks can be assessed based on the considerations provided in this appendix, aiming at identifying the preconditions and any major gap that need to be filled when contemplating the introductio n of a PD system. It is important, however, to assess the level of the key functionalities of each building block as captured by the respective indicators rather than the composite stage at the building block level, as there are some functionalities that from a PD system perspective are more important than others. The assessment can help identify the major gaps to be filled prior to the introduction of a PD system to maximize the likelihood of its success and increase its effectiveness.