Garcia-Kilroy, CatianaSilva, Anderson Caputo2012-03-192012-03-192011-03-01https://hdl.handle.net/10986/3377This paper examines the current stage of development of government securities markets in the non-GCC MENA region focusing in five countries that have government bond markets with a minimum size and greater potential for market development: Egypt, Jordan, Lebanon, Morocco and Tunisia. The analysis focuses on the five key building blocks that normally sustain deep and liquid public debt markets: (i) money markets; (ii) primary market (issuance policy and placement mechanisms); (iii) secondary market organization; (iv) investor base; and (v) clearing and settlement infrastructure. The study shows that despite country differences, several common weaknesses in the key building blocks explain the underdevelopment of MENA bond markets. Most important among these are a symbiotic relationship between banks and Governments caused by lack of alternative investments that makes banks act as captive demand and dominate bond markets, opportunistic primary issuance practices, and excess liquidity in the financial system. These demand and supply characteristics have led to highly concentrated buy-and-hold portfolios by banks and State-owned institutions, poor price discovery and lack of liquidity in secondary markets. A set of actions to unlock market development in MENA is proposed involving measures in all key building blocks - from improvements in monetary policy implementation and liquidity management to enhancements in issuance practices, price transparency, and clearing & settlement infrastructure. Measures to improve the role of mutual funds and foster foreign investor presence are also of utmost importance to increase competition and investor diversification in these markets.CC BY 3.0 IGOACCOUNTINGALTERNATIVE INVESTMENTSARBITRAGEASSET CLASSAUCTIONAUCTIONSAVERAGE DEBTBALANCE SHEETBANK DEBTBANK LIQUIDITYBANKING SECTORSBOND FUNDBOND FUNDSBOND HOLDERSBOND MARKETBOND MARKET CAPITALIZATIONBONDSBUY-BACKSCAPACITY BUILDINGCAPITAL ACCOUNTCAPITAL LOSSESCAPITAL MARKETCAPITAL MARKET DEVELOPMENTCAPTIVE INVESTORSCASH FLOWCDSCENTRAL BANKCENTRAL BANKSCENTRAL GOVERNMENT DEBTCENTRAL SECURITIES DEPOSITORYCHECKSCLEARING HOUSECOLLATERALCREDIT MARKETSCREDIT RATINGCREDIT RATINGSCREDIT RISKCURRENT ACCOUNT DEFICITSCURRENT ACCOUNT SURPLUSESDEBT INSTRUMENTSDEBT LEVELSDEBT MANAGEMENTDEBT MANAGEMENT POLICYDEBT MARKET DEVELOPMENTDEBT MATURITIESDEBT MATURITYDEBT SECURITIESDEPOSITDERIVATIVESDEVELOPING GOVERNMENT BONDDEVELOPING GOVERNMENT BOND MARKETSDEVELOPMENT OF DEBT MARKETSDOMESTIC DEBTDOMESTIC DEBT MARKETDOMESTIC DEBT MARKETSDOMESTIC EQUITYDOMESTIC FINANCIAL MARKETSDOMESTIC MARKETSDOMESTIC TRADABLE DEBTEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSEXCESS LIQUIDITYEXCHANGE RATESEXPENDITUREEXTERNAL DEBTFACE VALUEFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL MARKETFINANCIAL RISKFINANCIAL RISKSFINANCIAL STABILITYFINANCIAL SYSTEMFISCAL DEFICITSFISCAL POLICIESFIXED COUPONFLOATING RATEFOREIGN CURRENCYFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETFOREIGN EXCHANGE MARKETSFOREIGN INVESTORFOREIGN INVESTORSGLOBAL BONDGLOBAL BOND INDICESGLOBAL CAPITALGLOBAL CAPITAL MARKETSGOVERNMENT BONDGOVERNMENT BOND MARKETSGOVERNMENT DEBTGOVERNMENT DEBT MARKETGOVERNMENT DEBT MARKETSGOVERNMENT FINANCINGGOVERNMENT SECURITIESGOVERNMENT SECURITIES AUCTIONGOVERNMENT SECURITIES MARKETSGOVERNMENT SPENDINGILLIQUID MARKETSILLIQUID SECURITIESINDEXED BONDSINFLATIONINSTITUTIONAL INVESTORINSTITUTIONAL INVESTORSINSTRUMENTINTEREST RATEINTERMEDIATION SPREADSINTERNATIONAL BANKINVESTMENT ALTERNATIVESINVESTMENT FLOWSINVESTMENT FUNDINVESTOR BASEINVESTOR PARTICIPATIONISSUANCEISSUANCE OF LONG-TERM SECURITIESISSUANCESLACK OF COMPETITIONLEGAL AGREEMENTLEVEL OF DEBTLIABILITYLIABILITY MANAGEMENTLIQUID BENCHMARKSLIQUID DOMESTIC DEBT MARKETLIQUIDITY MANAGEMENTLIQUIDITY RISKLOCAL CURRENCYLOCAL DEBTLOCAL DEBT MARKETSLONG-TERM DEBTLONG-TERM YIELDSMACROECONOMIC CONDITIONSMARKET CAPITALIZATIONMARKET DEVELOPMENTMARKET EFFICIENCYMARKET INDICESMARKET INFRASTRUCTUREMARKET MAKERSMARKET MAKINGMARKET PARTICIPANTSMARKET PLAYERSMARKET PRICESMARKET REFORMSMARKET SIZEMARKET STRUCTUREMARKET TRANSPARENCYMARKETABLE DEBTMATURITIESMATURITYMATURITY EXTENSIONMATURITY SPECTRUMMATURITY STRUCTUREMATURITY STRUCTURESMATURITY TRANSFORMATIONMICROSTRUCTUREMONETARY POLICIESMONETARY POLICYMONEY MARKETMONEY MARKETSMUTUAL FUNDSOPPORTUNITY COSTOUTSTANDING DEBTPORTFOLIOSPOTENTIAL INVESTORSPRICE DISCOVERYPRICE FORMATIONPRICE TRANSPARENCYPRIMARY DEALERPRIMARY DEALER SYSTEMSPRIMARY DEALERSPRIMARY MARKETPRIMARY MARKETSPRIVATE PLACEMENTSPUBLIC DEBTPUBLIC DEBT MANAGEMENTPUBLIC DEBT MARKETPUBLIC DEBT MARKETSREMITTANCESREPOREPO FRAMEWORKREPO FRAMEWORKSREPO MARKETREPO MARKETSREPO TRANSACTIONREPOSRESERVERESERVE REQUIREMENTSRESERVESSECONDARY MARKETSECONDARY MARKET DEVELOPMENTSECONDARY MARKET LIQUIDITYSECONDARY MARKET PRICESSECONDARY MARKET TRADINGSECONDARY MARKET TRANSACTIONSSECONDARY MARKETSSECONDARY TRADINGSETTLEMENTSETTLEMENT INFRASTRUCTURESHORT-TERM TREASURY BILLSSPOT MARKETSWAPST-BILLT-BILLST-BONDT-BONDSTAXTIME DEPOSITSTRADINGTREASURYTREASURY BILLSTREASURY BONDSVALUATIONYIELD CURVEZERO COUPONWorld Bank10.1596/1813-9450-5611