Speaking at the European Primary Dealers Association Second Annual European Government Bond Summit in Brussel, Commissioner Almunia outlined the impact of the recent market turmoil on financial and government bond markets and the issues to be addressed.
“One of the most striking lessons from the current turmoil is that liquidity is strongly linked to the confidence of market participants.
Turning to the government bond market, Commissioner Almunia underlined that “while the foundations for delivering greater efficiency and liquidity have been put in place, there is evidence that we can improve further the functioning of this market”.
Effects of the recent financial turbulence have not been uniform across the euro-area government bond market. This was reflected in increased volatility in yields, but also in increased spreads between bonds according to their issuer.
“These changes have been the result of flight–to-quality effects - even between relatively risk-free assets”, Almunia said. “It confirms that government bonds within the euro area are not perfect substitutes, even if they share the same or similar credit ratings”, he continued.
“It seems increasingly clear that however successful the euro-area government bond market has been in terms of integration, it may be under-performing relative to its potential”, Almunia said. “This is why we must pursue all efforts to promote progress towards deeper integration within this market but also within the financial sector as a whole.”
“The forthcoming review of Lamfalussy which the Commission will launch in November will be an important step to this end.”
Full Speech
© Graham Bishop
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article