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Over the intermeeting period, yields on 10-year sovereign debt of the advanced foreign economies followed the yields on comparable-maturity U.S. Treasury securities higher, and volatility in sovereign bond markets rose, particularly in Japan. Japanese equity markets also displayed substantial volatility; equity prices fell sharply late in the period and erased the gains that had been registered since early April, when the Bank of Japan announced that it would expand its asset purchases in order to nearly double the size of its balance sheet. European equity indexes were little changed, on net, over the period, and euro-area financial conditions remained relatively stable. Spreads of yields on Italian and Spanish government debt over yields on German bunds increased only a few basis points, while comparable spreads for Greek sovereign debt declined notably. The foreign exchange value of the dollar was little changed, on average, relative to the currencies of the advanced foreign economies, but appreciated against EME currencies amid weak incoming data on economic activity and monetary policy easing in some EMEs, along with rising U.S. Treasury yields. Emerging market mutual funds experienced sharp outflows in recent weeks, while EME stock prices declined and EME credit spreads widened on net. |