Thesis (MDevF (Business Management))--University of Stellenbosch, 2009. / ENGLISH ABSTRACT: The importance of market microstructure in determining the success of a bond market in allocating financial resources depends on the degree to which the microstructure elements like liquidity, efficiency and volatility have been designed to determine the proper price at which matching of demand and supply in an efficient and effective manner is done. This research project analyzes some of the fundamental microstructure elements responsible for the current state of the Botswana bond market. The Botswana bond market is still in its infant stage hence there is little information on trades, which contributes to the liquidity problem. The purpose of the study was to investigate the liquidity and efficiency in Botswana’s bond market. The study also sought to compare the behaviour of the Botswana bond market to those of South Africa and further indicate what is behind the bond market emergence. Houweling, Mentink and Vorst‘s (2003) measure was used, in addition to a combination of simple regression and latent models. In the test of efficiency, a static model has been employed. Overall, it is established that the corporate bond market is less efficient and is illiquid. Furthermore, it is revealed that Botswana is still lagging behind South Africa when it comes to the level of development of the corporate bond market.