Markets and operations 1999 Q1

• During the fourth quarter of 1998, the Bank’s repo rate was reduced three times, by a total of 125 basis points.
• Three-month interest rates implied by short sterling futures fell sharply, by around 100 basis points at dates up to September 1999 and around 50 basis points for dates in late 2000 and early 2001.
• Nominal gilt yields fell to their lowest levels since the 1950s, and real yields on index-linked gilts fell to the lowest levels since they were introduced in 1981.
• Sterling weakened during the fourth quarter, influenced by the yen’s rally, a narrowing of the United Kingdom’s positive interest rate differentials, and selling of the currency resulting from arbitrage trades related to the transition from the Ecu to the euro.
• The US Federal Reserve lowered interest rates, and there were coordinated interest rate reductions in the prospective European single currency area to a common rate of 3% by end December.
• The FT-SE 100 recovered almost in full from its fall in the late summer, while the Dow Jones Industrial Average set a record high.
• Volatility peaked in many markets in October, and declined thereafter.

Markets and operations