The changeover to a single currency is likely to have an enormous effect on European bond markets by creating new liability structures, performance benchmarks and asset allocation models. The impact should be very positive. The macroeconomic characteristics of Emu – fiscal discipline, low interest rates, reduced currency risk – and the microeconomic effect on bond markets – low operational costs, enhanced efficiency, better liquidity – should provide a major boost for suppliers and users of private debt markets.
One major effect will be a larger capital market after Emu, with at least three new market sectors likely to emerge.
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