Conversely, they must sell bonds when the price of bonds is falling. Put another way, they will always be reinforcing the current direction of the market and never “leaning against the wind.” Clearly, if these hedging-related transactions are large relative to the underlying market, the hedging strategy could make significant demands on market liquidity and lead to higher market volatility.
These achievements have enhanced mutual understanding within Europe and safeguarded peace and freedom among an ever-growing number of countries that have become part of the European Union. Of these achievements, the European monetary union (EMU) is likely to be the most outstanding, not least because our common currency is probably more tangible than any other European project.