Statement by Financial Markets Committee: Roundtable Discussion on Bond Market Development
Enhance breadth of the market to promote liquidity
The Roundtable also examined the use of repos as an alternative liquidity management tool and funding instrument for financial institutions. The annual trading volume has been growing since Bank Negara Malaysia liberalised short-selling and reverse repo operations in 2015. The trading volume of repos averaged RM195 billion per annum since 2012. The Roundtable highlighted the need to review existing regulatory frameworks to allow more diverse participants in the repo market.
The Roundtable also deliberated on improving market liquidity by introducing more hedging instruments. This included further expansion of the short selling framework as well as increasing participation in the repo, bond swap and Interest Rate Swap (IRS) market. The further development of onshore hedging will complement the liquidity in the secondary market, particularly on the longer end of the yield curve.
The participants also discussed the development of bond investment products for retail investors and noted the importance of educating retail investors on the basics of investing in bonds.