Inscribing markets, shaping policy: a sociological investigation into the yield curve
This thesis investigates the central mediating role of a device, the yield curve, in the enactment of sociomaterial agencements in and around the secondary market for sovereign bonds. In part 1, it traces the historical developments by which the yield curve came to sit within the arrangements constituting government bond markets and later central banks, and the market and policy practices which it engendered. In part 2, it studies the contemporary organising of social order in the interaction between financial markets and central banks, and the perpetual reassembling of arrangements as a response to crises. The thesis relies primarily on a set of 51 elite and in-depth interviews with buy-side fund managers and traders, investment bankers, arbitrage traders in hedge funds, and central bankers, across Edinburgh, London, Frankfurt, and New York. Additionally, a set of primary and secondary documents from various sources, including the Bank of England and stockbroking firms, informs the historical analysis of the rise of government bond markets (UK and US) and the architecture of monetary governance in the UK. The findings in Part 1’s chapter 3 and chapter 4 follow a performativity argument to show how, as the yield curve became a core part of government bond markets, it shaped those very same markets which it was purported to represent. By assisting in the development of a novel set of evaluation practices in stockbroking firms in the City of London, it led to the consolidation of the gilt market. It was also a crucial component of the sociomaterial arrangements of investment banks in the US through which derivatives emerged and via which the risk-neutral world of ‘no-arbitrage’ was established. In turn, the yield curve was itself shaped as it came to sit within multiple sociomaterial arrangements and practices - from derivatives desks to arb desks and central banks – and thus took on multiple ontologies, from an object with which to extract value, to a risk management object, and from a mathematical universe to be solved via calculation, to a representation of market expectations. Chapter 5 elaborates on how the sociomaterial agencement of inflation-targeting central banking in the 1990s was the outcome of a long and complex process of reconfigurations of the alignments between central banks and bond markets, in the context of processes of financialisation and liberalisation of markets, that ultimately put the yield curve at the centre of the central bank’s sociomaterial arrangements and practices. Part 2’s chapter 6 switches gears and turns the focus on the ways in which, rather than leading to chaos or social disorder, the multiplicity of agencements explored in the previous chapters render order by way of a set of routinised and institutionalised practices. As a mutable mobile, the yield curve acts as a coordinating device around which fictional expectations and ‘arbitrage’ practices revolve, thus exhibiting a level of universality that transcends the locality of specific sociomaterial arrangements and, even more crucially, connects them. Nevertheless, chapter 7 shows how fragile this social order is as a set of crises threaten to disrupt it. As a response, the various sociomaterial arrangements reconfigured and reassembled ‘the social’ in order to weather the crises’s threats and to re-establish social order.