Non-equity financial markets used to be ‘hidden’ in Europe, in the sense that relative to their size, they traditionally received less attention from ordinary investors and the media than equity markets. This phenomenon was accentuated by the fact that the Financial Services Action Plan was primarily geared towards equity markets. Given the crucial role played by bond markets in the economy through the capital allocation process, monetary policy decisions and the hedging of risk, this new report, by CEPS Research Fellow Jean-Pierre Casey and CEPS CEO Karel Lannoo, attempts to demystify bond markets and clarify a general misapprehension among investors and regulators about how these overwhelmingly wholesale, off-exchange markets operate. It first highlights recent developments in European bond markets in light of the ongoing transformation of the European financial system triggered by financial sector liberalisation, the ongoing process of disintermediation, and the introduction of the euro. The bond market microstructure and recent developments in the primary and secondary market architectures are then examined, especially in light of the ongoing phenomenon of electronisation of fixed income trading. Recent regulatory measures taken at the EU level that will impact on European bond markets are assessed, and the desirability, utility and feasibility of certain policy measures are examined as well. The report comes at a critical time – prior to the Commission’s upcoming, mandated review of the MiFID transparency requirements and their possible applicability to non-equity markets.