twice as high or more – as in the period of globalisation and free capital flows leading up to world war i. 5 now it could immediately be objected that the world of today is a vastly different place from that of these historical episodes, so that any comparison is not valid. during world war ii and up to 1951, us bond rates were effectively pegged by the fed under the monetary procedures then in place. hence, the bond market was not really a market. 6 the us corporate debt market was not so regulated but it was a vastly reduced market in size in this period, after the extremely high rates of default in the paolo mauro, nathan sussman and yishay yafeh ( 2000 ), ‘ emerging market spreads : then versus now ’, imf working paper, wp00 / 190, november ( available at http : / / www. imf. org / external / pubs / ft / wp / 2000 / wp00190. pdf ). this ended with the 1951 “ accord ” between the federal reserve system and the us http : / / www. richmondfed. org / publications / economic _ research / the _ fiftieth _ anniversary _ of _ the _ treasuryfederal _ reserve _ accord / for details. treasury. see period of the great depression. 7 the peak number of us corporate borrowers rated by moody ’ s in the mid 1920s was not surpassed until 1997. 8 so while those bonds that were in the market from the end of world war ii until the early 1970s paid quite low spreads, it is not clear to what extent this provides a reasonable basis for comparison with the larger and more active market of today. on the other hand, it is a natural human tendency to think that the world we face is unprecedented in its risk and complexity compared with the past, when it probably is not. 9 it has to be said as well that the 1970s and 1980s were also, historically, rather an unusual period. this era saw a major outbreak of price inflation, which had hitherto been seen only during wars. inflation was not only high, but highly variable, and policy - makers struggled to formulate an effective response. this was extremely disruptive for fixed - income markets, and for financial asset pricing generally. nominal yields rose to unheard of levels. 10 the business cycle downturns of this period seemed to be much more damaging than earlier post - world war ii recessions. in general, it

peter pang : hong kong mortgage corporation retail bond issues opening remarks by mr peter pang, deputy chief executive of the hong kong monetary authority and executive director of the hong kong mortgage corporation limited, at the signing ceremony for the retail bond issue under the hkmc's retail bond issuance programme, hong kong, 1 september 2006. * * * good afternoon ladies and gentlemen, on behalf of the hong kong mortgage corporation, i welcome you all to this signing ceremony for the new retail bond to be offered to the public next monday. five years ago, in october 2001, the hkmc introduced a mechanism to offer retail bonds through placing banks. this move received very warm welcome from both the banking sector and retail investors. so far, we have issued eight retail bonds for a total amount of hk $ 11 billion. two major factors are behind the success of the hkmc's retail bond issues. first it is our strong credit rating. in fact, our credit rating has recently been upgraded by s & p ’ s to aa with stable outlook and by moody's to aa3 with positive outlook. secondly, the hkmc meets the needs of retail investors through continual product innovation. on this occasion, we again bring some new features to our retail bond issuance. apart from issuing two - year notes in hong kong dollar and in us dollar, we are introducing a new 10 - year hong kong dollar zero coupon bond. this is the first time that a zero coupon bond product is offered to the retail public in hong kong. it is also the first time we are issuing retail bond with a ten - year tenor. " zero coupon " bonds are intended for investors who wish to save up funds for longer - term use. they do not need the cash flow from the interest payments on conventional bonds, but they would wish to save up the principal and interest for future retirement or children ’ s education. by investing around hk $ 32, 000 in this zero coupon bond, the investor will receive hk $ 50, 000 after ten years. if investors should find a need to sell the bonds prior to maturity, they are free to do so. we have a market making arrangement with our placing banks to provide quotes to buy such bonds to ensure secondary market liquidity. apart from the zero coupon bond, the hkmc is also issuing two - year us dollar retail bond, following our successful, inaugural issue of retail us dollar bond last year. we are now offering two - year retail bond den