September 2022 issue contents
De jure Benchmark Bonds

Eli Remolonaa and James Yetmanb


As the most liquid of instruments, benchmark bonds play an important role in price discovery. Where markets fail to create them, however, can governments do so? In Indonesia, Malaysia, and Thailand, authorities have designated specific bonds as benchmarks. We measure these bonds' liquidity and find that they succeed as benchmarks about 55 percent of the time. In contrast to the experience of large advanced markets, our estimates suggest that choosing on-the-run issues as de jure benchmark bonds is a poor strategy. Instead, what leads to success in emerging markets is choosing seasoned bonds that already have a record of superior liquidity.

JEL Code: G10, G12, G14.

Full article (PDF, 36 pages)

a  Asia School of Business
b  Bank for International Settlements