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New Strategies for Emerging Domestic Sovereign Bond Markets

  • Hans J. Blommestein
  • Javier Santiso

The forces shaping the revolution in banking and capital markets have radically changed the financial landscape during the past three decades. A remarkable feature of this changing new landscape has been the astonishing rate of internationalisation of the financial system in the last two decades, with emerging markets becoming increasingly important participants. At times, this participation led to an excessive reliance on foreign financing, making the participation of these countries in the global financial system more vulnerable to shifts in expectations and perceptions. The sovereign debt management strategy suffered from many structural weaknesses, failing to take into account international best practices in financing budget deficits and developing domestic government securities markets. Consequently, emerging markets experienced serious financial crisis episodes. Against this background, the paper focuses on new and more sophisticated strategies to develop domestic bond markets, taking into account the risk profile, complexities and other constraints of emerging markets. The paper’s central thesis is that risk-based public debt management and liquid domestic bond markets are important, mutually reinforcing strategies for emerging financial markets to attain: i) enhanced financial stability, and ii) a more successful participation in the global financial landscape. It will also be shown that this twin-strategies approach requires taking a macroeconomic policy perspective. Le paysage des marchés de capitaux internationaux a changé de manière drastique au cours de ces dernières années. Un levier particulièrement puissant de ces changements a été celui de l’internationalisation des marchés financiers au cours des deux dernières décennies, les marchés émergents acquérant en particulier un nouveau protagonisme. Cette réémergence s’est, dans le passé récent, accompagnée de crises et de turbulences, la dépendance à l’égard des flux de portefeuille étrangers s’accompagnant d’une vulnérabilité accrue de la part des économies émergentes, tributaires des changements d’anticipations et de perceptions prévalant sur les marchés internationaux. La stratégie de la gestion de la dette d’État a ainsi pâtit de nombreuses défaillances, se trouvant notamment incapable de prendre la pleine mesure des meilleures pratiques internationales en matière de financement budgétaire et de développement de marchés de capitaux locaux solides. En conséquence les marchés émergents ont aligné les épisodes de crises financières. Le papier ici présenté met en perspective les évolutions les plus récentes et avec elles la profonde transformation en cours des marchés de capitaux émergents. Il souligne en particulier l’apparition de nouvelles stratégies de gestion des risques liés aux dettes émergentes, des stratégies plus sophistiquées prenant davantage en compte le profil des risques sous-jacents, ainsi que les nouvelles complexités et contraintes dominant les marchés émergents. La thèse centrale du papier est que la combinaison des gestions actives des risques de dette publique et la prise en compte des liquidités affluant vers les marchés de dettes domestiques sont des stratégies qui se renforcent mutuellement pour : i) atteindre une plus grande stabilité financière ; ii) optimiser l’intégration de ces économies dans le système financier international.

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File URL: http://dx.doi.org/10.1787/208818582608
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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 260.

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Date of creation: Apr 2007
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Handle: RePEc:oec:devaaa:260-en
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