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It is well understood that bond markets play an important role in the development of the overall financial sector. Bond markets also help to make efficient investment and financing decisions, to improve efficiency in the design and implementation of monetary policy, provide financial stability by mitigating rollover risk and interest rate risk for the borrowers, provide an alternative source of finance to firms and thus reduce the monopoly of the banking sector. Given the importance of this market, this paper aims to investigate the factors that may be important for developing a market for domestic bonds. First, we discuss the importance of macro- and microeconomic factors in the development of a government bond market. We focus on the role of socio-economic and institutional factors in a country’s bond market development. For empirical purposes, we extend the model used by Claessens, Klingebiel, and Schmukler (2003) by including a number of socio-economic and institutional variables and see if they are important in influencing the size of the domestic bond market. For empirical estimation, we use data on macroeconomic indicators and a set of social and institutional indices for a panel of developed and emerging markets. The empirical findings of this paper suggest that socio-economic and institutional factors play an important role in determining the size of the market for local currency bonds.