note on recent development in financial markets Related: Financial Administration - Indian Public Finance, Public Finance

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Recent Developments in Global Financial Markets are:

Global financial markets witnessed turbulent conditions during 2007-08 as the crisis in the US sub-prime mortgage market deepened and spilled over to markets for other assets. Concerns about slowdown in the real economy propelled a broad-based re-pricing of growth risk by the end of the year.

In the wake of the persistent uncertainties about the US sub-prime mortgage market and other credit markets exposures, liquidity demand surged. To ease liquidity conditions, major central banks continued to inject liquidity in a more collaborative manner.

Elevated inflationary pressures in many economies reflected historical peaks in crude oil prices. Share prices in advanced economies fell, while those in emerging market economies (EMEs), which had shown some resilience, declined sharply from January

2008. Long-term government bond yields in advanced economies softened, reflecting flight to safety by investors and easing of monetary policy in the US. In the currency markets, the US dollar depreciated against major currencies.

The pricing behaviour has begun to mirror the strains of the ongoing economic recession and prices have been decidedly volatile given the environment of heightened uncertainty.

Pressure on credit market persists in the wake of recession in many economies and subdued corporate performance, which has given rise to the expectation of possible increase in defaults.

During the fourth quarter of 2008-09, the equity valuations generally remained low on account of concerns stemming from the weak financial and economic outlook.

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