The world’s major fixed income markets have in recent years seen a marked increase in the relative importance of private sector debt instruments. Outside Japan, non-government securities have overtaken government securities as the larger segment of the cash market. Similarly, in derivatives markets, trading in instruments based on private sector obligations, in particular interest rate and default swaps, is increasing whereas turnover in many government bond futures contracts has declined. Some investors have been slower to adjust their portfolios to the new issuance patterns, and this differential response has hastened the decline in trading activity and liquidity in the UK gilt and US Treasury markets. At the same time, the introduction of the euro and development of electronic trading platforms have contributed to an improvement in liquidity in euro markets. While government securities remain among the most liquid assets available to investors, as non-government instruments gain liquidity they are increasingly being used to price and hedge other securities and perform other functions for which government securities tended to be used in the past. This process appears to be furthest advanced in the euro market, where the interest rate swaps curve is emerging as the benchmark yield curve.