International Perspectives on Foreign Bond Markets

36 Pages Posted: 26 Aug 2009

See all articles by Jonathan A. Batten

Jonathan A. Batten

RMIT University

Warren P. Hogan

University of Technology, Sydney - School of Finance and Economics

Peter G. Szilagyi

EDHEC Business School; Central European University

Date Written: August 25, 2009


While the domestic bond markets of Asia-Pacific have grown considerably since the Asian Financial Crisis of 1997, it is clear that they remain undeveloped relative to the region’s weight in the world economy. This paper adds to the policy debate on this issue by proposing that in order to encourage further development in these markets, regulators should make them more accessible to foreign borrowers.

We offer insights into the nature and mechanics of foreign bond issuance in domestic markets by investigating the key characteristics of 3,132 foreign bonds issued in 14 countries (other than the US) between 1928 and June 2009. We find that the foreign borrowers that tap domestic markets are overwhelmingly high credit quality and comprise sovereigns, supranationals, and major financial institutions. Although there is a significant corporate presence, usually by non-bank financial institutions, issuance by this sector tends to have a shorter maturity and generally carry lower credit ratings. There is a preference for simple fixed-rate payment structures, which can then be swapped into the currency and coupon type of choice using currency and interest rate derivatives. On the whole, the long-term viability of foreign bond markets appears to be linked to the presence of highly liquid foreign exchange and derivatives markets that facilitate risk management and transformation, enabling regulation that facilitates cooperation with market participants, the presence of benchmark issues, and competitive pricing between alternate market segments.

Keywords: Markets, Financial Market Development, Foreign Bonds

JEL Classification: F34, G18, O57

Suggested Citation

Batten, Jonathan A. and Hogan, Warren P. and Szilagyi, Peter G., International Perspectives on Foreign Bond Markets (August 25, 2009). Available at SSRN: or

Jonathan A. Batten (Contact Author)

RMIT University ( email )

Level 12, 239 Bourke Street
Melbourne, Victoria

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Warren P. Hogan

University of Technology, Sydney - School of Finance and Economics ( email )

Sydney, NSW 2007
+61 2 9514 7730 (Phone)
+61 2 9514 7711 (Fax)


Peter G. Szilagyi

EDHEC Business School ( email )

58 rue du Port
Lille, 59046

Central European University ( email )

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Budapest, 1051
+36-1-887-5092 (Phone)
+36-1-887-5005 (Fax)


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