Partially reflecting the effect of high oil prices, Moody’s rating agency currently forecasts that global default rates will pick up somewhat in early 2006, heralding less favourable credit conditions to come. It should, however, be noted that similar forecasts made at the beginning of 2005 proved to be inaccurate.
II.2  Financial markets  In the global fixed income markets (see slide 6), the flattening of yield curves throughout the second and the third quarters of 2005 has been something of a puzzle. More recently, worries about global inflation, mainly driven by high oil prices, seem to have reversed the decline in long-term bond yields, at least temporarily.