Article at a glance:

Thailand builds a bond market

Why should emerging economies want to build local-currency bond markets? The reasons are clear: a deep and liquid bond market provides an alternative to bank credit, thus helping to create a more competitive financial sector and to cut the cost of borrowing. In these economies, bonds typically have longer maturities than do bank loans and therefore reduce the need for offshore borrowing (which carries currency risk).

The take-away

Developing a local-currency bond market may top the agenda of many emerging economies that are intent on financial reform, but building such a market from scratch isn't easy. Governments looking to develop a bond market where none exists can learn much from the example of Thailand, which has built one quite rapidly.