Discussion

Ex. 10.

a) Read the text.

b) Discuss the reasons which led to the creation of the UK debt market and its structural changes in the late 80s.

The UK Government bond market is generally the market of gilt-edged securities. These securities are considered to be very safe.

The market origins go back to 1694 when the Bank of England was founded to help the Government raise money to fight the French. Borrowing to finance wars has been common and the outstanding amount of debt has soared during all of the major wars since then. The major expansion, however, came in the post-World War II period, especially in the 1970s and early 1980s. Historically, the market developed with a strict separation between brokers and jobbers. The brokers did business with the public, but the jobbers did business only with brokers, and with each other.

On 27 October 1986 the market was structurally reorganized. As a result of the "Big Bang" the market switched to a new trading system, modelled on the US bond market. The essential change in this market was that a structure with separate jobbers and brokers was replaced with a structure with gilt-edged market makers (GEMMs) who deal directly with large customers.

The gilt-edged markets constitute the major proportion of money passing through the Stock Exchange. Transactions are typically much larger than in the equity market.

UK gilts consist of two distinct markets, the short gilts market securities with five years or less to maturity) and the market for medium and long gilts.

Some time in the past there were forecasts that the gilt market would disappear by the end of the century. The Big Bang reforms succeeded in achieving one of the key objectives - to make the market accessible and attractive to international investors. There has been an increasing trend towards investors moving funds between the major bond markets, taking views on both the bonds themselves and the currencies involved. Now, in its current form it is firmly in the main- stream as one of the world's most actively traded bond markets.

As to the UK corporate bond market, it has had a mixed history. Historically, it has been a major source of corporate funds but issuance virtually stopped during the 1970s and early 1980s due to high inflation and large government issuance.

In the last few years, the market has sprung to life again, helped by the fall in long-bond yields due to inflation fall and temporary disappearance of the government's borrowing requirements.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
gilt-edged securities	золотообрезные ценные бумаги	золотообрезні цінні папери
origin	происхождение	походження
the outstanding amount of debt	размер непогашенного долга	розмір непогашеного боргу
soar	cтремительно повышаться	стрімко підвищуватися
broker	брокер	Брокер
jobber	джo66ep	джоббер
Big Bang	«Биг Бен» (реорганизация Лондонской фондовой биржи)	«Біг Бен» (реорганізація Лондонської фондової біржи)
accessible	доступный	доступний
mainstream	основные направления, главная линия	основні напрямки, головна лінія

Ex. 11. Read the dialogue, sum up its content and act it out: