To further manage their risk profiles in changing interest rate environments, there are now sophisticated risk‐management tools such as Interest Rate Swaps (IRS) at their disposal. (ii)  The central bank has a crucial role in promoting secondary market trading of debt securities – by improving the effectiveness of monetary policy implementation.
Efforts to reduce the volatility of short-term interest rates, while credibly signaling the policy stance, go a long way in increasing investor confidence while promoting the maturity transformation of financial intermediaries’ portfolios. Moreover, stable money market rates foster repo activity and anchor the yield curve as trading develops in longer maturities.