heuristics and biases. new york : cambridge university press kindleberger, c. p ( 1978 ), manias, panics, and crashes : a history of financial crises, palgrave macmillan. knight, f. h ( 1921 ), risk, uncertainty and profit, houghton mifflin co. kpmg / economist intelligence unit ( 2008 ), never again? risk management in banking beyond the credit crisis. mackay c ( 1841 ), extraordinary popular delusions & the madness of crowds, wordsworth editions. morris, s, and shin, h. s ( 2008 ), “ financial regulation in a system context ”, brookings papers on economic activity, mimeo. nyu stern school of business ( 2008 ), repairing the us financial architecture : an independent view. annex : chart 1 : probability density estimates chart 2 : probability density estimates for uk gdp growth for uk rpi whole sample ( 1857 - 2007 ) golden decade'( 1998 - 2007 ) density 0. 60 whole sample ( 1857 - 2007 ) golden decade'( 1998 - 2007 ) density 0. 60 0. 50 0. 50 0. 40 0. 40 0. 30 0. 30 0. 20 0. 20 0. 10 0. 10 0. 00 - 15 - 10 - 5 annual gdp growth ( % ) 0. 00 - 40 - 20 annual rpi ( % ) chart 3 : probability density estimates chart 4 : probability density estimates for uk unemployment for annual earnings growth whole sample ( 1857 - 2007 ) golden decade'( 1998 - 2007 ) whole sample ( 1857 - 2007 ) golden decade'( 1998 - 2007 ) density 0. 80 density 0. 80 0. 70 0. 70 0. 60 0. 60 0. 50 0. 50 0. 40 0. 40 0. 30 0. 30 0. 20 0. 20 0. 10 0. 10 0. 00 0. 00 - 5 unemployment ( % ) - 40 - 20 - 0. 10 annual earnings growth ( % ) chart 5 : probability density estimates chart 6 : probability density estimates for uk base rate for uk house price inflation whole sample ( 1857 - 2007 ) golden decade'( 1998 - 2007 ) whole sample ( 1954 - 1997 ) golden decade'( 1998 - 2007 ) density 0. 40 density 0. 08 0. 35 0. 07 0. 30 0. 06 0. 25 0. 05 0. 20 0. 04 0. 15 0. 03 0. 10 0. 02 0.

##ion among investors, led to rising demand for risk - free assets, including government bonds. even so, the greater supply of government bonds has in periods caused investors to be more selective and some dmos have found it difficult to obtain sufficient demand at auctions and when issuing syndicated loans. especially in the latter part of 2008 and the beginning of 2009, dmos paid a concession premium in order to attract investors. in addition, yield spreads to germany widened considerably in a number of european countries, cf. chart 2. this reflected a flight - to - quality, as the german bond market is considered to be the most liquid in europe. in addition, investors attributed higher credit risk premiums due to increasing concerns about fiscal sustainability in view of the rapidly growing budget. since mid - 2009 the primary markets have improved. dmos no longer pay concession premiums and yield spreads between european countries have narrowed. the market has been able to absorb the considerable higher volume of government debt issuance better than expected. issuance strategies the challenging issuance climate and uncertainty about future borrowing requirements have prompted several dmos to pursue more flexible issuance strategies. this has included issuance in government securities outside key on - the - run issues, and use of various loan programmes, including cp and emtn programmes. dmos have also introduced new issuance techniques to secure successful auctions. at the same time, dmos have an increased focus on investor relations in order to avoid that investors disregard an issuer on the basis of incomplete information. the improvement of the financial markets and lower uncertainty concerning issuance needs has meant that dmos to a larger degree are returning to a more predictable issuance strategy. roll - over risk and competition from government guaranteed bonds in the beginning of the year government deficits and financial rescue packages were primarily funded by issuing short - term papers such as t - bills and commercial papers. this raised concern about roll - over risk, especially in the light of expected high government deficits in the years to come. the concern of roll - over risk eased during the year as the gradual improvement of the government bond market enabled dmos to lengthen the maturity profile of their issuance. so far debt managers have by and large covered the required record issuance need for 2009 at reasonable costs. the concern in the beginning of the year regarding possible competition from government guaranteed bonds has proven to be less of an issue than expected. this can primarily be attributed to the fact that the high liquidity of government securities has