Bond Outlook August 23rd

Our attempt at answering key macro questions includes Fed hikes later in the year and another hike in the UK and Euroland. It will a close thing to avoid recession.

Bond Outlook [by bridport & cie, August 23^rd 2006]

All investors are, or should be, asking themselves some very basic but difficult questions:

Will the slowdown in the US economy be gentle or severe? Merely slower growth or a recession?
Will the slowdown in itself bring inflation down to acceptable levels?
Has the Fed stopped hiking the overnight rate?
Will the decline in 10-year USD yields continue?
Is there now a “Bernanke put” in place, with the Fed ready to lower rates as soon as early 2007 if the slowdown borders on recession? (Or if the stock markets move down?).