volatility might appear to suggest that global markets are not expecting large changes in asset prices. and yet, in a short period over the end of last year and start of this one we saw very sharp moves across asset markets in response to what seemed relatively modest amounts of news. between mid - october and the end of the year spreads on investment grade bonds, for example, went up by around 50bps. all speeches are available online at www. bankofengland. co. uk / speeches since then, these moves have completely retraced – spreads at the start of may were the same as they were in mid - october last year. bonds in other currencies and high yield bonds went on a similar round trip. at one point towards the end of 2018, the s & p was 15 % lower than it had been just 3 weeks earlier – it is now at record highs. 20 the fall in financial asset prices seems to have been due in no small part first to market concerns about future economic growth and the recovery to better news about the world economy and to the signal of greater support to economic growth from central banks than had hitherto been perceived. but the episode may also suggest that when it comes to expectations about the value of debt, the market itself is very sensitive to changes in sentiment and a correction might come very quickly, either because of weakening expectations of economic performance or signs of inflation. given the apparent current compression of risk pricing, such a correction could be a sharp one. conclusion the level of the global debt stock relative to gdp remains near its record high, though it has stabilized over the past five years. the sustainable level of debt to gdp is not, however, a constant and there are reasons to believe that the lower trend real rate will likely support sustainability. while less expected, however, a relatively small increase in the trend rate could lead to a reassessment of debt sustainability. while there is evidence that the level of debt, as opposed to the growth rate, does not appear to be a good predictor of recessions and financial crises, the level does seem to be associated with depth of losses when crises occur. the historically high level of debt may generally suggest a higher vulnerability in periods of stress. the composition of debt, within the aggregate numbers, has changed since the crisis. emerging market debt has grown as a proportion of the global debt stock, over the past 10 years, with much of the increase driven by china. advanced economy public

, to the benefit of all market users. conclusion 38. i have tried in these remarks to explain major developments in uk financial markets over the past year. looking ahead, there is more to do, and i believe emu will open up new opportunities for the financial markets. i believe this will be particularly so for the international markets in london. we intend to be ready to take full advantage of these opportunities, right from the outset in january 1999, even though the uk will not participate in emu at that stage. the reason for this is very simple : london is the major european financial market, and we think that extending its activity to include financial services in euro is a significant contribution we in the uk can make from the outset to the success of the monetary union and of the single european market as a whole.