Domestic Bond markets in latin America: Achievemtns and challanges.

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DOMESTIC BONDS MARKETS IN LATIN AMERICA : ACHIVEMENTS AND CHALLENGES

Introduction

For the past few years domestic bond markets in Latin America have significantly expanded . There have been much progress made but susceptibility associated with refinancing risk stands out and a secondary market continues to suffer from low liquidity . In Latin America domestic bond markets have remained underdeveloped calling for more structural and policy barrier . There have been poor records on macroeconomic management with no expansion and deep investor base . There is

also no regulatory embargo which prevents primary and secondary growth of market activity . In addition , there is lack of sufficient infrastructure for issuance of private sector debt (Jeanneau and Tavor June , 2006 ,

.51

In Latin America economies there is a source of financing constituted by domestic bond markets with allocation of global investors . Expansion of markets show conscious efforts made by authorities in reducing susceptibility in unfavorable external shocks . Strengthening of demand conditions should be the main objective for domestic debts . Transition of more stable macroeconomic policies , elimination of embargo on foreign investments and moving to privately funded and managed pension have been used in achieving objective of domestic debts . In Latin America issuance of domestic securities have been extended and domestic markets debts widely vary . Public sector issuers dominate domestic securities markets and a short-term inflation indexed securities and floating rate continues to account for large shares of the extraordinary domestic government securities stock . There has been a significant change on composition...