How Emu will change the bond market

The US government staged a last-ditch attempt in November to convince European leaders to delay economic and monetary union (Emu) until the next century, arguing that the scheme in which they had invested so much political capital was just too risky.

But venture into the capital markets and you will find few more ardent supporters of the planned single currency than the London offshoots of the major US investment banks. They believe Emu will transform Europe's fragmented fixed-income markets into the world's closest replica of the US domestic bond market. The product range will be similar to that in the US as European governments cut deficits and a wide range of corporations issue in the public bond markets for the first time.

The efficiency benefits of a single currency may even lift European debt markets to a size close to that of the US. Further down the road, pension reform...