Transparency proposals for European sovereign bond markets

The structure of European sovereign bond markets has developed in a segmented manner and should be altered to improve transparency, argues Peter G. Dunne in a paper for the ECMI Policy Brief.

The author calls for a re-orientation of obligations and incentives to bring about a reduced segmentation of the market and spread the burden of liquidity provision across a wider group of market participants. 

The segmented nature of euro-dominated sovereign bond markets is an obstacle to transparency, writes Dunne. He argues that European sovereign issuers have the power and influence to provide incentives that would encourage dealers to support reduced segmentation. Likewise, dealers themselves can provide liquidity to investors by widening access to the inter-dealer segment of the market. 

By allowing the largest and most active investors access to inter-dealer electronic trading platforms, the author argues that the structure can be altered without adversely affecting liquidity, efficiency, or the benefits enjoyed by primary dealers and issuers.