Question

Consider the following statements with respect to Bond Market Development:
$1$. Greater economic size means greater bond market development.
$2$. Countries with stable exchange rate are conductive to bond market development.
$3$. High level of interest rate volatility in the fixed income securities market tends to lower bond market development.
Which of the given statements is/are correct?

• A. $1$ and $2$
• B. $1$ and $3$
• C. $2$ and $3$
• D. All of the above

Answer 1

The correct option is A $1$ and $2$

Factors affecting Bond Market Development:

1. Size of economy - Greater economic size means greater bond market development and

smaller economic size leads to smaller bond market

2. Exchange rate regime - Countries with stable exchange rate are conducive to bond market.

3. GDP per capita - If economy is expanded to a higher degree in a country. It will increase the level of bond market development.

4. Interest rate variability - High level of interest rate volatility in the fixed income securities market tends to lower bond market development.