European monetary system and european currency

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Looking ahead, other developments in the money markets are expected in the coming months. There are aims to establish new area-wide standards for the repo markets, with a view to overcoming the separation between different models in the national markets. These new standards could obviously co-exist with other standards and broader conventions for international transactions. In fact, over the last few months the European Central Bank (ECB) has been examining whether this co-existence could affect the integration of money markets. We have come to the conclusion that, in particular owing to the efforts of the sponsors of the different standards, this should not be considered a threat.

Finally, it should also be noted that national and international central securities depositories are currently developing links with one another, which will enable participants in one country to make direct use of securities deposited in other countries. Twenty-six of these links (concerning mainly Belgium, Germany, France, Luxembourg, the Netherlands, Austria and Finland) may be used by the Eurosystem.

3. Bond markets

I should now like to turn to bond markets and first to comment on the position of euro area bond markets in the global market. Some data sources on international securities issuance available so far show a pattern of increased reliance on euro-denominated bonds at the beginning of 1999, in particular as opposed to US dollar-denominated bonds. While it remains difficult to draw firm conclusions on the determinants of bond denomination choices without considering information on the nature of bond holdings and trading patterns, recent bond issuance volumes indicate that the euro has the potential to become an important currency for international bond issuance.

The importance of the euro area bond market is also apparent in measures of secondary market activity, i.e. turnover or trading volumes. In particular, trading volumes on exchange-traded bond futures are indicative of the overall degree of market activity. Volumes traded in euro-denominated bond futures were low shortly before the changeover to the euro, when the bond markets in the euro area were exceptionally quiet. Since then, volumes have increased markedly and they currently stand at consistently high levels, which indicates a continuously high degree of turnover in euro-denominated bond markets in general.

Turning to the internal structure of the bond markets of the euro area, I should like to make an initial observation related to the recent marked increase in euro-denominated corporate bond issuance, which was accompanied by an increase in the average size of issues. This tendency is likely to continue in the future, in particular to the extent that bonds may be used by firms to finance increasing mergers and acquisitions activity in the euro area. The underlying reasons for increased bond issuance by euro area firms are clear, both on the supply and on the demand side. On the supply side, large firms with good credit ratings will find opportunities in the increased depth and liquidity of the euro area bond market. On the demand side, the respect by governments of the parameters of the Stability and Growth Pact over the medium term should leave more room for the private sector to issue debt securities. In addition, the euro area must be in a position to save in order to be able to take care of its future pension payments, and a part of these savings is likely to be invested in corporate debt securities. An increase in global demand for euro-denominated debt securities is also expected as the euro becomes a major reserve currency. Moreover, the demand for higher risk euro-denominated debt securities is likely to increase, particularly as the current low level of sovereign yields increases incentives to search for higher yields.

With regard to the government bond markets, an issue of importance for the euro area that I should like to stress is the fact that governments now find themselves in a rather new position as issuers. This reflects a number of developments, two of which I should particularly like to mention. First, the major public issuers have attempted to position themselves as providers of benchmarks for euro-denominated bond markets. Second, certain issues of government bonds have effectively gained larger portions of secondary markets, in particular in relation to developments that have occurred on bond futures markets.

Market participants have responded to these developments in the bond markets with a range of concurring or competing initiatives and alliances. In the derivatives industry, market participants have established new alliances. On the trading side, electronic cross-border platforms for bonds have been created or are in the process of being developed. On the clearing side, integrated platforms for different markets have been launched or are being finalised, while, finally, on the securities settlement side, initiatives have also been launched. It is important to note that while some of these developments are internal to the euro area, others aim at creating links with financial markets outside the euro area. One may reasonably expect that all of these new circuits, as well as others, may in the future be enlarged to encompass a growing number of market participants.

Реферат опубликован: 12/08/2008