In my remarks today, I will first outline the nature of fragmentation in a currency union. Then I will provide an overview of the history of bond market fragmentation in the euro area and explain how markets have shifted between complacency and fear in different phases of the euro’s lifetime.
Finally, I will discuss how the prospect of monetary policy normalisation is interacting with the progress made in European integration, and why flexibility remains an important element of monetary policy in current uncertain times. What is bond market fragmentation? Let me begin by defining what I mean by fragmentation, focusing on euro area sovereign bond markets.