Bond Outlook November 1st

If anything, the “swingometer” this week has moved slightly in favour of the Fed rate going down in early 2007. 10-year USD yields have moved still lower. There is growing unease that the knock-on effects on related industries and household borrowing, due to the decline of housing prices and construction spending, have yet to do their damage. The USD has returned to weakening. Only time will tell whether the USA is merely slowing in growth or entering recession, and whether cheaper oil will come to the rescue of indebted households.