a) Abhiraj
b) Sucheta
c) amrita
A developed domestic bond market enables a country to borrow from international markets by selling its bonds to foreign investors.
World Bond Market Portfolio: As of 2006, the size of the international bond market is an estimated $45 trillion, of which the size of the outstanding U.S. bond market debt was $25.2 trillion. The bond markets of developed countries not only had a large share of the global bond market, but also large economies relatively to the emerging or developing countries. The developed countries have outstanding bonds equal in magnitude to the size of their gross domestic product. The paper examines the determinants of two measures of local bond market development. The first is the ratio of the size of the local bond market to GDP and the second is the share of a country’s outstanding bonds that are denominated in the local currency.
Risk and Return Characteristics of International Bond Portfolios: This section deals with the various factors which attract foreign participation in the bond markets. The first is that the hedged returns are higher and less volatile than unhedged returns. Another feature is that unhedged bonds provided a more attractive skewness profile than hedged bonds. Last but not the least, the returns on emerging market bonds were much more volatile and exhibited significantly more negative skewness than developed country bonds.
Foreign Participation in Local Bond Markets: The extent and determinants of foreign participation in local bond markets is analyzed through comparing the allocation of US investors’ international bond portfolios with the composition of the world bond market portfolio.
Derivatives and Foreign Participation: US investo ...