Bond Outlook February 15th

In a week when the USD has strengthened, the US stock markets risen and consumer spending expanding, it is difficult to maintain the doubts we have over the fundamentals of the US economy, but maintain them we must. Just why American households, after trimming their sails in December, should let them out again in January is beyond simple explanation, although one comment put it down to mild weather! We rather suspect Christmas bonuses, combined with resolute refusal to take account the gathering clouds of a 6% and growing external deficit, low employment participation, the public and private reductions in health, education and welfare benefits, the pension crisis and the end of the housing bubble.