Bond Outlook by bridport & cie, November 3rd 2010

The US economy is, for want of a better word, constipated. The image may not be as attractive as our previous champagne cascade metaphor, but it aptly describes how liquidity is stuck within banks and corporations, but is failing to trickle down further into the economy in the form of spending, investment and property purchases. With QE2, the Fed is forcing cash in at one end in the hope that it comes out at the other.