Bond Outlook June 10 2009

We have, in recent days, begun to see a number of the forecasts made in recent Weeklies receive growing support, both through predicted events beginning to transpire, and via similar remarks being made by a number of worthy commentators:

• The intended return of Tarp loans by ten major US banks reinforces our view that the US financial markets are on the mend. Nevertheless, a return to full health cannot be declared until lending to small and medium enterprises resumes
• Long-term rates on T-Bonds are still climbing, with inventories of primary bond dealers running at unusually high levels
• Chinese proposals to create a trading/reserve currency based on the RMB are gathering speed.