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Using information from bonds issued over the past twenty years, this study finds that the largest banks have a cost advantage vis-à-vis their smaller peers. This cost advantage may not be entirely due to investors' belief that the largest banks are "too big to fail" because the study also finds that the largest nonbanks, as well as the largest nonfinancial corporations, have a cost advantage relative to their smaller peers. However, a comparison across the three groups reveals that the largest banks have a relatively larger cost advantage vis-à-vis their smaller peers. This difference is consistent with the hypothesis that investors believe the largest banks are "too big to fail." [ABSTRACT FROM AUTHOR]

Deals with a study which examined how the news contained in economic announcements influences sovereign bond market yields in the U.S. and Germany. Methodology; Observations about the U.S. Treasury market's reaction to economic news; Influence of U.S. data on European bond yields.

Explains the sharpest price changes and most active trading episodes in the US Treasury securities market. Relation of bond market's behavior to factors affecting the informational value of the announcements; Impact of macroeconomic announcements in bond market; Significant announcements with the greatest affects on price.

The author discusses issues related to monetary policy and economics. He states that the Federal Reserve Bank of Saint Louis in Missouri have advocated a policy of price stability. He emphasizes the importance of understanding how monetary policy strategies are related to bond-market outcomes to resolve such policy debates as whether the U.S. Federal Reserve should have an explicit inflation target or whether it should have a systemic response to fluctuations in asset prices.