tailieunhanh - Local currency bond markets and the Asian Bond Fund 2 Initiative

Viewing migrant networks as an information transmission mechanism influencing investment is a natural extension of existing work trade in the absence of formal institutions. Drawing on Grief’s (1989, 1993) work on the Maghribi traders of the 11th century, Rauch and Trindade (2002) provide empirical evidence that the overseas Chinese help link buyers to sellers across national borders. Giving pride of place to migrant networks in explaining the cross-national distribution of capital allows us to speak to a number of seemingly disparate literatures. Broadly speaking, our emphasis on cross-national migrant networks as a conduit for capital flows. | BANK FOR INTERNATIONAL SETTLEMENTS 14 July 2011 Local currency bond markets and the Asian Bond Fund 2 Initiative1 Summary The eight local currency government bond markets in which the ABF2 invests have made significant strides since the fund s inception in 2005. Liquidity has improved considerably in most of these markets and yield curves have become increasingly reliable. These improvements may be traced to the following factors a the growth of bond issuance in general and the consolidation of issuance in a few benchmark maturities b the increase in market making activity especially with the development of interdealer markets and the entry of interdealer brokers and c the lowering of barriers to participation by non-resident investors. In each of these factors the ABF2 project played an important catalytic role. But there remains work to be done. Depth and liquidity could still be improved by the development of repo markets and an opening up to non-resident investors. While issuance in the local currency corporate bond markets has surged these markets have yet to develop active secondary markets. These markets would benefit from more effective market-making arrangements and the introduction of certain types of derivatives. 1 This report was prepared at the request of Mr Akinari Horii former Assistant Governor of the Bank of Japan and Chair of the EMEAP Working Group on Financial Markets. It was prepared by Eric Chan Michael Chui Frank Packer and Eli Remolona. It draws heavily from interviews with asset managers investment strategists interdealer brokers and central bank staff in several of the EMEAP economies. The views expressed in this report are those of the authors and do not necessarily reflect those of the Bank for International Settlements. 1 34 Local currency bond markets and the Asian Bond Fund 2 Initiative 1. Introduction In December 2004 the EMEAP central banks launched the second stage of the Asian Bond Fund. The ABF2 as this initiative is called would