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Euro Bond Trading: How liquid can you get?

Government bonds, outstanding at March 31 1999
Ten-year benchmark bonds, outstanding at March 31 1999
Source: Salomon Smith Barney

Former head of the European Monetary Institute Alexandre Lamfalussy has lent his name as chairman of EuroMTS, the euro benchmark government bond trading system that started trading on April 10, because he strongly believes in what it is trying to achieve: a liquid, efficient and transparent market in euro government bonds. The ultimate prize is the establishment of the euro as a reserve currency to match the dollar. "We've seen an accelerated move to a market-centric system from the bank-centric system that has tended to prevail in Europe," Lamfalussy said in London last month. "I have no doubt that a market-centric system is more efficient, but there's a question whether it is stable." The key to stability, he concludes - for the pricing of corporate as well as public debt - is a liquid and transparent government debt market.

EuroMTS, with 24 primary market-makers as shareholders, is taking a shot at providing this with pan-European electronic trading of initially 27 leading German, French and Italian government bonds.

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