Markets and Operations - May 2000

Abstract

This article reviews developments in international and domestic financial markets and describes Bank of England market operations in the period 30 December 1999 to 7 April 2000. It does not, however, repeat the review of developments over the century date change that was contained in the February 2000 Quarterly Bulletin.

- Official interest rates were raised by 50 basis points in the United Kingdom, the euro area and the United States during the review period. Nevertheless, market-based indicators of short-term interest rate expectations were little changed in all three areas.

- The US yield curve became inverted in January and early February, largely in response to news about changes in the prospective supply of US government securities. This development had relatively little impact on gilt yields, however.

- World equity markets became significantly more volatile during the period, with sharp falls in IT-related share prices occurring during March and early April.

- Exchange rate movements generally continued the patterns observed in 1999 Q4; the US dollar and sterling continued to appreciate, while the euro depreciated further.