Bond Outlook October 19th

US capital flows have now changed to massive inflows for bonds, but net outflows for equity. This is propping up the dollar. We take the inflation danger very seriously.

Bond Outlook [by bridport & cie, October 19th 2005]

In August, bonds showed a big inflow into the USA, while equity showed a net outflow. Bonds had two positive components, foreigners buying US bonds ($ 84.1 billion), and Americans selling foreign bonds ($ 17 billion net). In contrast, net inflow for equity from foreigners dropped to $ 3.8 billion net, while Americans bought more foreign equity ($13.5 billion net). The resulting capital flow was easily enough to cover the current account deficit.

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