Central banks reasserted their sway over financial markets in recent months, after two quarters punctuated by bouts of sharp volatility. Markets proved resilient to a number of potentially disruptive political developments. Nevertheless, questions lingered as to whether the configuration of asset prices accurately reflected the underlying risks. With global growth showing moderate but persistent signs of strengthening and supportive monetary policy, investors’ risk appetite seemed to return during the period under review. As a result, volatility in financial markets subsided, commodity prices edged higher, corporate credit spreads narrowed, stock markets rallied and portfolio flows to emerging market economies (EMEs) resumed. At the same time, yields in core fixed income markets plumbed new depths, and the pool of government debt trading at negative yields grew further to briefly exceed $10 trillion in July. As the summer went on, negative yields percolated to the high-grade corporate bond market, particularly in the euro area. The apparent dissonance between record low bond yields, on the one hand, and sharply higher stock prices with subdued volatility, on the other, cast a pall over such valuations. Banks’ depressed equity prices and budding signs of tension in bank funding markets added another sobering note. The outcome of the United Kingdom’s referendum on European Union membership took many observers by surprise and caused a stir during few trading days. But its impact soon subsided. Central banks’ response, and investors’ perception that an extended period of easy monetary policy would still lie ahead, appeared to play a soothing role.