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The classifications of developed and developing can be defined in terms of absolute size (the value of bonds outstanding), size as a proportion of GDP, and in terms of the markets' functionality often reflected in primary and secondary market liquidity.

The first two definitions are relatively easy to measure, in that they can be quantified. The last definition, however, is a qualitative one, which considers the degree of liquidity and efficiency in terms of clear benchmarks, tenors available, and institutional arrangements. Also relevant are the sophistication and breadth of market participants - issuers, investors, market makers, and other intermediaries.

From this perspective, Hong Kong's and Singapore's bond markets are considered developed, despite their relatively small size, at least in absolute volume. Korea, on the other hand, has the largest bond market (including corporate bonds) after Japan in terms of absolute volume outstanding, but there's little tiering of credit risk, maturities are kept short, and there's little or no international participation. These qualitative features of developed bond markets best reflect the policy issues that need to be addressed in the developing markets. Doing so will aid the ongoing progression of the region's lessdeveloped markets.

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* Contributed by: -
Philip Bayley is Primary Credit Analyst with Standard & Poor's, Melbourne.