Working Paper

How to Attract Non-Resident Investors to Local Currency Bonds : The Cases of Ukraine, Panama, Colombia, and Brazil

Show simple item record

collection.link.213
https://openknowledge.worldbank.org/handle/10986/11866
collection.name.213
Other papers
dc.contributor.author
Velandia, Antonio
dc.contributor.author
Secunho, Leandro
dc.date.accessioned
2021-06-03T20:14:16Z
dc.date.available
2021-06-03T20:14:16Z
dc.date.issued
2021-05-27
dc.date.lastModified
2021-06-04T05:11:28Z
dc.description.abstract
Driven by abundant liquidity and searching for better returns, many foreign investors became well acquainted with bonds denominated in the local currencies of emerging market countries. As documented by the country cases in this paper, Debt Management Offices (DMOs) in these countries happily embraced access to a "new" funding source and a more diverse investor base. The note explores how countries attracted foreign investors for local currency financing. DMOs have used several avenues to sell local currency securities to non-resident investors: from issuing Credit Linked Notes, or, Global Bonds offshore; to facilitating non-resident access to the domestic local currency bond market either by building a bridge with an International Clearing Securities Depository (ICSD), or, by fully integrating them through their participation in the local CSD. Countries, including Chile, Peru and Ukraine, frequently used Credit Linked Notes (CLNs) in the initial stages of local currency domestic bond market development. Others, such as Brazil and Colombia at times and Uruguay more frequently, relied on local currency Global Bonds. These securities save non-residents from the uncertainty of the local jurisdiction and the hurdles of the local clearing and settlement for which investors are willing to accept lower yields than the ones paid by domestic government securities. Neither of these avenues bring non-resident investors directly to the domestic bond market which is desirable if the DMO wants to reap the benefits of a more liquid and transparent market and potentially lower government's borrowing costs. The participation of non-residents in the domestic bond market would require building a bridge with an ICSD, or, relying on the local CSD. The bridge has been the solution in countries where custody and settlement processes pose unsurmountable obstacles for non-residents to jump into the domestic debt market; successful experiences of this avenue include countries like Mexico, Chile and Peru. The alternate avenue is to develop a local infrastructure robust enough so that non-residents do not miss the ICSD; this has been the path chosen by Colombia and Brazil. No alternative has emerged as a superior solution and each arrangement must be assessed under the context of the particular country.
en
dc.identifier
http://documents.worldbank.org/curated/en/466211622137596835/How-to-Attract-Non-Resident-Investors-to-Local-Currency-Bonds-the-Cases-of-Ukraine-Panama-Colombia-and-Brazil
dc.identifier.uri
http://hdl.handle.net/10986/35664
dc.language
English
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Equitable Growth, Finance and Institutions Insight;
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo
dc.subject
LOCAL CURRENCY BOND
dc.subject
EMERGING MARKET ECONOMIES
dc.subject
DEBT MARKETS
dc.subject
BOND MARKET
dc.subject
DEBT INSTRUMENTS
dc.title
How to Attract Non-Resident Investors to Local Currency Bonds
en
dc.title.subtitle
The Cases of Ukraine, Panama, Colombia, and Brazil
en
dc.type
Working Paper
en
okr.date.disclosure
2021-05-27
okr.doctype
Publications & Research
okr.doctype
Publications & Research :: Working Paper
okr.docurl
http://documents.worldbank.org/curated/en/466211622137596835/How-to-Attract-Non-Resident-Investors-to-Local-Currency-Bonds-the-Cases-of-Ukraine-Panama-Colombia-and-Brazil
okr.googlescholar.linkpresent
yes
okr.guid
466211622137596835
okr.identifier.externaldocumentum
090224b088635615_1_0
okr.identifier.internaldocumentum
33117802
okr.identifier.report
159579
okr.imported
true
en
okr.language.supported
en
okr.pdfurl
http://documents.worldbank.org/curated/en/466211622137596835/pdf/How-to-Attract-Non-Resident-Investors-to-Local-Currency-Bonds-the-Cases-of-Ukraine-Panama-Colombia-and-Brazil.pdf
en
okr.region.country
Brazil
okr.region.country
Colombia
okr.region.country
Panama
okr.region.country
Ukraine
okr.topic
Finance and Financial Sector Development :: Debt Markets
okr.topic
Finance and Financial Sector Development :: Finance and Development
okr.topic
Private Sector Development :: Emerging Markets
okr.topic
Public Sector Development :: Public Financial Management
okr.unit
EFI-MTI-Macro/Fiscal-Tax (EMFTX)

Show simple item record



This item appears in the following Collection(s)