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The BIS Quarterly Review presents an overview of recent developments in financial markets, before turning in more detail to highlights from the latest BIS data on international banking and financial activity. Special features include an article on the international banking activity amidst the recent financial market turmoil.
Financial markets witnessed a cautious return of investor risk tolerance over the remainder of the period up to end-May 2008, the report states. Markets subsequently rebounded in the wake of repeated central bank action and the Federal Reserve-facilitated takeover of a large
Mid-March was a turning point for many asset classes. Amid signs of short covering, credit spreads rallied back to their mid-January values before fluctuating around these levels throughout May. Market liquidity improved, allowing for better price differentiation across instruments. The stabilisation of financial markets and the emergence of a somewhat less pessimistic economic outlook also contributed to a turnaround in equity markets.
In the international debt securities markets, net issuance remained broadly stagnant in the first quarter of 2008. The fall in net issuance of bonds and notes came chiefly from the euro-denominated segment and in those countries with significant euro-denominated issuance, ie
Trading on the international derivatives exchanges rebounded in the first quarter of 2008. Most of the increase was observed in derivatives on short-term interest rates.
2005.
The over-the-counter (OTC) derivatives market showed relatively steady growth in the second half of 2007, despite the continued turmoil in global financial markets. Growth was particularly strong in the credit segment, due possibly to heightened demand for hedging credit exposure.
In the international banking market, activity continued to expand in the fourth quarter of 2007, despite the ongoing tensions in the interbank market. A significant portion of this increase was accounted for by new credit to emerging markets, with claims on Asia-Pacific and
Special feature: International banking activity amidst the turmoil
The analysis concentrates on the longer-term developments in the interbank market which contributed to the funding difficulties experienced during the turbulence, especially in the dollar segment. The authors find signs that national banking systems were starting to unwind their international exposures in the second half of 2007, especially their exposures to US non-bank entities.
Other features include:
- Managing international reserves: how does diversification affect financial costs?
- Credit derivatives and structured credit: the nascent markets of Asia and the Pacific
- Asian banks and the international interbank market