De jure benchmark bonds

Eli Remolona and James Yetman

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: As the most liquid of instruments, benchmark bonds play an important role in price discovery. Where markets fail to create them, however, can governments do so? In Indonesia, Malaysia and Thailand, authorities have designated specific bonds as benchmarks. We measure these bonds’ liquidity and find that they succeed as benchmarks about 55% of the time. In contrast to the experience of large advanced markets, our estimates suggest that choosing on-the-run issues as de jure benchmark bonds is a poor strategy. Instead, what leads to success in emerging markets is choosing seasoned bonds that already have a record of superior liquidity.

Keywords: Benchmark bond; price discovery; market liquidity; informational public good; recycling; de jure; de facto; wannabe benchmark; seasoned; selection bias; probit model; inverse Mills ratio; on the run; recycled. (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020-09
New Economics Papers: this item is included in nep-sea
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Related works:
Journal Article: De jure Benchmark Bonds (2022)
Working Paper: De jure benchmark bonds (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-84

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