This document reviews alternatives to promoting financial development in Latin America. Specifically, it concentrates on the role that government bonds can play in the development of capital markets. The government bond sector forms the backbone of a modern securities market. It is the sector that contributes most to transforming savings into investment, disseminating information, managing risk, and supporting activity in other securities.
Government bonds serve to implement the most important transfer of savings in an economy.
The yield curve of government securities provides the paramount guide to the future behavior of inflation and interest rates. Moreover, it establishes the benchmark for the valuation of all other fixed-income securities. Government bonds mitigate domestic financial risks, allowing firms to concentrate on their advantages in production. Their superior liquidity and absence of credit risk makes government bonds an efficient proxy for trade in other securities. Superior liquidity and absence of credit risk.