Among the main developments:
- The sharp fall in oil prices was reflected in a widening of the current account deficit of the oil exporting countries in the first quarter of 1986 and some modest strengthening of the current account positions of oil importers, including the United States, where the deficit is estimated to have fallen back from its end-year peak;
- Activity in the international capital markets reached record levels in the three months to May, with the emphasis mainly on new issues of fixed-rate bonds, which rose by over 40% in the period, although volume fell back in May as the general rally in world bond markets came to an end: unfavourable market conditions continued to depress activity in the FRN sector;
- The fourth quarter of 1985 saw record growth in cross-border interbank business in the BIS reporting area. However, amid continuing nervousness about the risks inherent in cross-border lending, new loans to countries outside the main financial centres were highly selective, with only five countries absorbing as much as 95% of the increase in EIS-area banks' 'spontaneous' lending in 1985;
- In the foreign exchange markets, the downward trend in the dollar apparent since the G5 meeting in September was not sustained in the three months to May and the effective rate strengthened marginally over the period. The EMS was realigned following the French elections in April.