This development is particularly remarkable in many emerging-market countries, in which longer-dated fixed-coupon bonds issued in domestic currencies had ceased to exist during the inflationary 1970s and 1980s.
It cannot be denied that the potential for further financial turmoil exists, but to date the stresses have not been of the order of magnitude we saw a year and a half ago. Much still hinges, however, on the way European policy makers craft their ongoing response to a complex problem. We in Australia must naturally keep a careful watch on all this.