Bond Outlook October 18th

Financial markets in direct contradiction with most major banks! Who is right? Our optimism on the USA is very cautious, although quite high for the rest of the world.

Bond Outlook [by bridport & cie, October 18^th 2006]

Even though most of the big banks – the exception being JP Morgan – see a major slowdown coming for the US economy, stock markets remain bullish. The implications for interest rates of the two views, the former pessimistic about the US economy as a whole, the latter optimistic, are diametrically opposite. The one sees the Fed having to bail out the economy with a rate cut early next year, the latter sees rates continuing to rise to contain demand-pull inflation.