A tale of two responses

The bond markets have evolved so much since the last crisis it is difficult to imagine how anyone could have written a more epic script, particularly when it comes to what constitutes the new “normal” level of yields and to the ever-expanding roles of central banks - the US Federal Reserve Bank (the Fed) and the European Central Bank (ECB) being at the forefront of this.

As the covid-19 shock waves reverberated, central banks were prompt to respond and the Fed and the ECB unarguably took over the reigns of economic policies. The magnitude of this pandemic has also highlighted the stark differences between the two approaches to preserving financial stability. Such differences really root from their policy objectives, which were set out decades ago.

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