The advantage of bond futures is that their trading is not constrained to the total amount of government securities on issue, meaning that liquidity problems are less common once the futures market is developed. The futures market in New Zealand has struggled to develop because of a few factors.
An important issue is the ‘chicken and egg’ syndrome again, where market participants have been reluctant to trade futures until liquidity has improved, but liquidity will not improve until more participants enter the market and trade.