Missing Links: Regional Reforms for Asia's Bond Markets

Asia's debt capital markets are of limited use to many potential participants. They fail to induce issuance of sufficient depth and risk quality to satisfy investors, and provide little guard against financial shocks. The region may become less prone to contagion by reducing reliance on its banking sectors and improving the efficiency with which it deploys savings. Active bond markets will improve resource allocation by providing an unbiased, visible price mechanism, widen investor choice and diminish the contagion effects of market instability. This requires national and collaborative actions representing unprecedented economic cooperation and tests of regional and bilateral institutions.