But the different national government bonds will tend to trade on essentially the same yield curve, with the focus of the market being concentrated, even more so than at present, on spread relationships. 31. This of course raises the interesting question -- spread over what? Who will provide the benchmark issues? Moreover, the intensified focus on spread may produce two further results. First, there will be even greater incentives than at present for national governments, who will BIS Review 110/1997  -6-  remain responsible for their own debt management, to converge in their techniques for issuing and marketing their debt. It will be interesting to see whether this will generate greater co-ordination amongst debt management authorities in managing their debt programmes, including, for example, their auction timetables. 32. A second effect in this area flowing from the concentration on spreads may be greater interest in developing a diversified, deeper corporate bond market in euro, as has long been present in the United States, but much less so in other countries. If this happens, it could be a considerable boon to corporate borrowers as a whole because it would extend the range of financing opportunities open to them. 33. A second area where financial market activity in the euro is likely to generate new opportunities is in the short-dated money markets. Foreign exchange traders do clearly face some contraction in their activity, as an inevitable consequence of currency unification.
Indeed, any decision to instead rely on morerestrictive interest rate policies to achieve financial stability at the expense of poorer macroeconomic outcomes must pass a cost–benefit test. And such a test would have to clearly illustrate that the adverse economic outcomes from more-restrictive interest rate  3  I should note that increases in interest rates since last spring have increased discount factors and thus lowered the present value of pension fund and other fixed nominal liabilities. For instance, see Fitch Ratings (2013). 4  BIS central bankers’ speeches  policies would be better and more acceptable to society than the outcomes that can be achieved by using enhanced supervisory tools alone to address financial stability risks. I have yet to see this argued convincingly. Macroprudential tools Let’s discuss some of these macroprudential tools. One simple but important tool is enhanced monitoring. Even before the recent financial crisis, central bankers were well aware of the key role played by stable financial markets in economic activity. Since the crisis, however, the analysis of financial stability issues has been greatly expanded and given a more prominent role in the FOMC’s deliberations. We comb through reams of data looking for evidence of incipient risks to financial stability. The Federal Reserve also has revamped its approach to bank supervision substantially to expand the focus on macrofinancial risks. Traditional bank supervisory tools are being used more intensively, and new tools have been developed. Bank capital stress tests are one wellknown addition to our supervisory toolkit.