Bond Outlook February 14th

Long has it been recognised that capital flows have been driving macro-economics, notably in keeping the USD from falling drastically – as it would on a purely current account basis – and preventing long-term USD yields from rising. In addition, the current imbalance in the world economy is seen by commentators as unsustainable, even though financial markets seem to assume that it is. We therefore see it as one our duties to scan continually for events, rumours or trends which point to a change in the status quo.