Real yields, again measured by our own indexed gilts have fallen back to a little more than 3¼%; and the first US indexed bond issue yields much the same. And nominal yields have fallen by 200 basis points or more in continental Europe and Japan - though rather less in the United States and the UK. There has been more excitement in the foreign exchange market, with the dollar in particular first weakening against the yen and the major continental currencies until the spring of 1995 and then progressively recovering. BIS Review 22/1997  -2-  These developments were certainly influenced by the factors which I mentioned a moment ago. In particular they have been influenced by the continuing broadly-based consensus - in countries all around the world, and across a large part of the political spectrum within countries - on the importance of macro-economic policy discipline. Macro-economic policy is no longer seen as an instrument for short-term demand management, which can be used to trade-off the conflicting demands of growth and stability in the short run. It is now much more widely understood and accepted that the rate of growth that can be sustained, or the level of employment that can be achieved and maintained in anything other than the short run, depend fundamentally on the structural, supply-side, characteristics of the economy, and not just on the level of demand.
Mr. George conveys his reflections on the development of bond market yields over recent years Remarks by the Governor of the Bank of England, Mr. E.A.J. George, at the Euromoney International Bond Congress held in London on 25/2/97. I’m honoured to have been invited to open this 3rd Euromoney International Bond Congress. I remember with great pleasure launching your initial Congress in October 1994 in the Barbican. It is an even greater pleasure now to launch the QEII! That first Congress was an ambitious and imaginative venture. But it immediately established itself as a major event in the international financial calendar. I congratulate Euromoney on that achievement, and, to judge from the program, on organising an even bigger and better Congress on this third occasion. I am delighted to welcome you all here. I remember our debate at that first Congress particularly well, Mr. Chairman. I remember it because I looked up my notes over the weekend! The context then was one in which yields had fallen very sharply, to unusually low levels, almost everywhere during 1993 only to back up just as sharply during 1994. We concluded, I think, that none of us really understood either the earlier strength of the market or its subsequent weakness! But we had a very enjoyable two days of discussion.