and investors need to evaluate developments in the broader market, including how their investments might turn out in less benign scenarios. careful attention to these issues will help ensure that in getting the economic benefits of low interest rates we do not generate unacceptable risks on the financial side. concluding remarks let me conclude by trying to tie these various strands together. very low global interest rates have been with us for some time. and it is likely that they will stay with us for some time yet. fundamentally, this reflects the low appetite for real investment relative to the appetite for saving. these low rates are encouraging investors to buy existing assets as they seek alternatives to bank deposits earning very low or zero rates. asset prices have increased in response. some of this is, of course, desirable and, indeed, intended. but the longer it runs on without a pickup in the appetite for real investment, the greater is the potential for new risks to develop. during this period, while we wait for the investment environment to improve, we need to be bis central bankers ’ speeches cognisant of potential risks of asset prices running too far ahead of real activity. this is true in australia, as it is elsewhere around the world. the underlying solution is for an improvement in the investment climate. monetary policy can, and is, playing an important role here. but ultimately, monetary policy cannot drive the higher ongoing expected returns on capital that are required for sustained economic growth and for reasonable long - term returns to savers. it is instead government policy – including in some countries, increased spending on infrastructure – that has perhaps the more important role to play here. thank you very much for listening this evening. bis central bankers ’ speeches

##modative monetary policy and the low rate of inflation have contributed to easy financial conditions for issuers. also, there has been a noticeable improvement in measures of business conditions to well above average levels ( graph 10 ). the resulting improvement in, and outlook for, business profits has helped reduce actual and prospective defaults. in turn, this has underpinned a narrowing of credit premia. http : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 06. html 9 / 19 6 / 7 / 2018 some features of the australian fixed income market | speeches | rba graph 9 http : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 06. html 10 / 19 6 / 7 / 2018 some features of the australian fixed income market | speeches | rba graph 10 these low spreads are mirroring developments overseas ( graph 11 ). again, this is consistent with australia's open capital markets. spreads reflect an assessment of risk, and if the price of risk in australia were to deviate too far from the global price – beyond that suggested by any differences in fundamental credit quality – there would be opportunities for profitable arbitrage. one way or another, the process of arbitrage would lead to a degree of convergence between spreads. http : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 06. html 11 / 19 6 / 7 / 2018 some features of the australian fixed income market | speeches | rba graph 11 australian issuers have responded to the low yields and low spreads over the past couple of years. issuance in many markets is up. banks have taken advantage of favourable funding conditions to tap the bond market. in 2017, their gross issuance of bonds was the second highest since the global financial crisis ( graph 12 ). and net issuance this year is currently running well ahead of issuance at the equivalent time last year. http : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 06. html 12 / 19 6 / 7 / 2018 some features of the australian fixed income market | speeches | rba graph 12 corporate bond and kangaroo issuance rebounded from their 2016 levels in 2017, although there have been recent years where issuance was higher. in early 2018, spreads in the kangaroo market narrowed to