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Gongpil Choi, Federico Ortega, and Mr. Manmohan Singh
What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers? We discuss the economics of collateral re-use and the present institutional structure in Asian and Latin American countries. Our empirical investigation suggests pledgeability enhances financial stability and reduces dollar funding risk. We also explain the Eurozone collateral pool to incentivize EMs, and why many securities (e.g., BTPs, Italy) are acceptable in London but not EM securities. Looking forward, EMs liaison with International Central Securities Depositories (ICSDs), and global banks’ balance sheet capacity to intermediate cross-border collateral will be crucial for this market to develop.
Gongpil Choi, Federico Ortega, and Mr. Manmohan Singh

What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers? We discuss the economics of collateral re-use and the present institutional structure in Asian and Latin American countries. Our empirical investigation suggests pledgeability enhances financial stability and reduces dollar funding risk. We also explain the Eurozone collateral pool to incentivize EMs, and why many securities (e.g., BTPs, Italy) are acceptable in London but not EM securities. Looking forward, EMs liaison with International Central Securities Depositories (ICSDs), and global banks’ balance sheet capacity to intermediate cross-border collateral will be crucial for this market to develop.

Mr. David A. Grigorian

foreign exchange onshore increased; turnover in the onshore spot, forward, and swap FX markets improved, bid-ask spreads narrowed and ringgit volatility declined. 7 Finally, foreign presence has become less concentrated in shorter maturities. Nonresident inflows into the MGS market resumed in the second quarter of 2017, driven by both global and domestic factors, including new FMC policy measures. Malaysia’s rapid economic growth and the recovery in global sentiment toward emerging market securities likely helped. By December 2017, nonresidents’ share in the MGS

International Monetary Fund. External Relations Dept.

between emerging market bonds and U.S. treasury securities was about 750 basis points at both the beginning and end of 2000. This contrasted greatly with the experience of 1998, when spreads were highly volatile, and 1999, when spreads tightened significantly, raising returns to investors in emerging market securities. Indeed, during 1999-2000, he said, emerging market debt outperformed all other fixed-income asset classes. Interestingly, the asset class shared the top-ranking performance with other “risk assets” in 1999, while in 2000, it was in the company of bonds