Bond Outlook May 23rd

The excessive amount of cheap credit looking for a home, which we identified in our last Weekly as a source of concern for the Fed, is receiving much attention, not least from Chairman Bernanke. Credit looking for borrowers, or liquidity looking for a home, the money, fed by foreigners buying T-Bonds and other assets, has to go somewhere. The tightening of mortgage conditions and the slowdown of mortgage equity withdrawal have pushed the credit to other outlets, mainly to businesses and, to a lesser extent, to credit card purchases.