Bond Outlook March 8th

This has been week of two key changes, closely linked: long-term yields are at last rising and emerging markets are seeing a correction in bonds and stocks.

Bond Outlook [by bridport & cie, March 8^th 2006]

This has been a week with two major global trends asserting themselves. They are linked:

Liquidity is decreasing and, with, it the ability of global GDP to maintain its momentum
Emerging markets have gone thorough a significant correction in both equities and bonds

All central banks are on a tightening path with the possible exception of the BoE. For the Fed and ECB it is a matter of degree, but for the BoJ a fundamental change in direction is finally happening – from zero to positive interest rates in both nominal and real terms (as deflation ends).