slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Presentation Outline PowerPoint Presentation
Download Presentation
Presentation Outline

Loading in 2 Seconds...

play fullscreen
1 / 19

Presentation Outline - PowerPoint PPT Presentation


  • 63 Views
  • Uploaded on

Strategies for Improving the Primary and Secondary Bond Markets in Taiwan Paul Hsueh Professor of Finance National Chung Cheng University 11/20/2009. Presentation Outline. Session Topic Strategies for prospering the primary and secondary bond markets Focus of my presentation

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Presentation Outline' - urbana


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Strategies for Improving the Primary and Secondary Bond Markets in TaiwanPaul HsuehProfessor of FinanceNational Chung Cheng University11/20/2009

presentation outline
Presentation Outline
  • Session Topic
    • Strategies for prospering the primary and secondary bond markets
  • Focus of my presentation
    • Taiwan bond market had the highest bond trading turnover in Asia (ex. Japan), but the trading activity has declined significantly in recent years
    • Highlight the problems in the market and provide suggestions for improving the current situation
impact of global financial crisis
Impact of Global Financial Crisis
  • Credit squeeze
    • Mortgages, junk bonds,….
    • Fire sales of risky bonds and flocking to government bonds
    • flight to quality
  • Liquidity squeeze
    • Higher-grade corporate bonds, Structured notes, Auction-rate securities, ……..
    • flight to liquidity
us treasury corp bond yields
US Treasury/Corp. Bond Yields

Widening and narrowing credit

spread through the crisis period

10-yr IG

10-yr Treasury

taiwan treasury corp bond yields
Taiwan Treasury/Corp. Bond Yields

Relatively stable credit

spread throughout the crisis

us bond market issuance volume
US Bond Market Issuance Volume

in $US billions

Corp.

T-bond

Significant increase in T-bond issuance following the crisis

taiwan bond market issuance volume
Taiwan Bond Market Issuance Volume

in $NT billions

Relatively stable T-bond issuance

T-bond

Corp.

daily trading volume in us bond market
Daily Trading Volumein US Bond Market

in $US billions

T-bond

Not significantly affected by the Crisis

Corp.

daily trading volume in taiwan bond market
Daily Trading Volumein Taiwan Bond Market

in $NT billions

T-bond

Volume dropped long before the Crisis began

Corp.

problems facing taiwan bond market
Problems Facing Taiwan Bond Market
  • Monopolistic T-bond investors
  • Disappearing bond mutual fund
  • Malfunctioning bond futures market
holding concentration of 5 year otr t bond in taiwan
Holding Concentration of 5-year OTR T-bond in Taiwan

Top 3 investors hold over 60%

of on-the-run government bonds

holding concentration of 10 year otr t bond in taiwan
Holding Concentration of 10-year OTR T-bond in Taiwan

Top 3 investors hold over 80%

of on-the-run government bonds

monopolistic t bond investors
Monopolistic T-bond investors
  • Deterrent to other bond investors
  • Unreasonable special repo rate
  • Threat of short squeeze for bond futures sellers
shrinking bond mutual fund
Shrinking Bond Mutual Fund
  • Important institutional investor in the bond market
  • Major player in the early development of Taiwan bond market
  • Decreasing bond fund assets in recent years
trends in bond fund investing in the us
Trends in Bond Fund Investing in the US

in $US billions

Money Market Funds

Financial crisis attracts more money into bond funds

Bond Funds

trends in bond fund investing in taiwan
Trends in Bond Fund Investingin Taiwan

in $NT billions

Money Market/Bond Funds

Separation

of M.M. fund

and Bond fund

Trading

volume

< 1% are in bond funds

Bond funds play a vital role in secondary market trading activity

malfunctioning bond futures market
Malfunctioning Bond Futures Market
  • Bond futures facilitates cash market trading and offers a vital hedging function
  • Taiwan’s T-bond futures started in 2004 but only with sluggish activities
  • Physical delivery is hampered by the illiquidity of deliverable bonds
trading volume and open interest of t bond futures in taiwan
Trading Volume and Open Interest of T-bond Futures in Taiwan

No. of Contracts

Dominated by far-month contracts and day trade

Trading

Volume

Not used for

hedging purpose

conclusions
Conclusions
  • Taiwan bond market is facing serious problems and global financial crisis is not the cause
  • Position limits on OTR T-bond holdings
  • Tax incentives for bond mutual funds
  • Cash delivery of T-bond futures