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Why bond markets?

Issue not whether bond markets are good or not, but whether they can emerge and grow and if so how and with what implications.

If a market for long term bonds exists, along with a liquid secondary market to trade them, this provides an alternative way of financing long term investment without much mismatch of liquidity and maturity.

The argument is that since governments (unwilling to tax) are strapped for funds and there are limits on bank funding, this is an imperative. Essential for infrastructure financing.

Since in principle bonds can be securitized, the risks associated with financing long term investment can be pooled and shared.

Problem for finance capital

Bond market development in developing countries is inadequate and skewed.

In most countries corporate bond markets don’t exist, and where they do not all firms cannot enter them. Only highly rated bonds work and that too through the private placement route.

Bond financing for infrastructure is particularly underdeveloped.

Presented by : C.P Chandrasekhar , IDEAS/JNU

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