in the local bond market. the first is greater market liquidity which has allowed the bond market to adjust to the change in monetary policy without difficulties. and the second is the improved communication between policymakers and market participants, which has allowed the bond market to form its own expectations about policy direction and to respond accordingly. these two qualities, in my view, are positive for the development of the bond market in the longer - term. outlook and developments in the bond market this year the thai economy will continue to expand, driven by momentums in domestic demand and export, including the launching of new infrastructural projects. higher investment will imply higher funding requirement. given ample liquidity in the system, funding investment expansion domestically should be a preferred option to funding it from abroad. domestic funding will help make the domestic credit market competitive while helping to avoid the unnecessary pick - up in external debt. it is in this context of domestic resource mobilization that the bond market can have an important role to play. this is to say that while bank credit will continue to be a major intermediary for investment finance, the need for long - term investment financing will offer considerable opportunity for the bond market. on the supply side, the fixed income market can be an important channel for long - term capital mobilization, while on the demand side, there will be ample demand to invest in fixed income instruments from domestic institutional investors. it is in this context that the current efforts to develop the domestic bond market by the government are timely, and this priority now ranks high on the government's agenda. roles of the bank of thailand in developing the bond market a high - level domestic bond market development steering committee was set up by the government in january this year. the committee is chaired by the finance minister and comprises high - level representatives from both the public and private sectors, including the bank of thailand. the aim of the committee is to promote the development of the domestic bond market in five key areas, namely, ( 1 ) the primary market ( 2 ) the secondary market ( 3 ) taxes ( 4 ) market infrastructure and ( 5 ) market information. as for the bank of thailand, we have been tasked with the responsibility to develop an active secondary market. to meet this challenge, the bank of thailand has mapped out a multi - year strategy from which our work plan for bond market development this year will focus on six areas. first is the development of the private repo market. the repo market will provide bond market

bandid nijathaworn : developing the bond market - a central bank perspective remarks by mr bandid nijathaworn, deputy governor of the bank of thailand, at the asset forum, bangkok, 29 march 2005. * * * distinguished guests ladies and gentlemen let me first thank the asset magazine for inviting me to give this luncheon address. it is a pleasure to be here. i also would like to congratulate the organizer for putting up today's event. the bond market in thailand is now at an important stage of development and a function like this is certainly a positive contribution. for my brief remark today, i want to make a few points on the thai bond market from the standpoint of the bank of thailand. i also want to share with you our plan for developing the bond market this year. from the bank of thailand's point of view, the bond market is of exceptional importance to us. this is because it is the market that we operate monetary policy through open market operations and through our operations in the repo market. therefore, the more developed and efficient the bond market, the more effective the conduct of monetary policy would also be. also, a vibrant domestic bond market is essential for a robust and efficient financial system. this is important for the development of the economy in the longer - term. at this time, the thai bond market has a strong potential to become the important third pillar of thailand's financial structure next to the credit and the equity markets. at present, the size of the bond market in terms of market capitalization to gdp is about 50 percent. hence, there is considerable scope for the local bond market to grow and expand. thai bond market in 2004 last year, the thai bond market grew by about 9 percent in terms of the amount of bonds issued, while activities in the secondary market increased by about 12 percent. the growth reflects mostly transactions in government securities, particularly treasury bills and bank of thailand bonds. last year was also an important year for bonds as it was the year that we saw a shift in the stance of monetary policy. the policy interest rate was raised three times in the second half of last year in response to increased pressure on prices and economic stability. looking back, one has to say that the bond market adjusted very well to the shift in the monetary policy stance. bond market interest rates responded in an orderly manner and moved in line with policy signal. this smooth adjustment reflects two important qualities that we are now seeing