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Banking

Bond Outlook January 13 2010

Growing disconnect between financial markets and the real Western economy makes us urge great caution, especially regarding the issuance of so many “junk bonds”. Diversifying currencies is to be recommended.

Bond Outlook [by bridport & cie, January 13th 2010]

The doubts we expressed last week, that the positive atmosphere of financial markets contradicted economic reality, have continued to grow. Unemployment in the USA and housing foreclosures are still rising. What GDP growth that is being achieved is dependent on government stimuli, and now, overhanging everything, is the end of quantitative easing foreseen for March. Deflation remains and may worsen even though government borrowing is likely to push up US long-term rates; they have already risen from 4.2% at 10 years to 4.6% over the last six weeks alone. Euroland and the UK are scarcely in any better shape. The problems of Greece are also straining solidarity in the Euro zone.

Asia, however, is thriving.

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