The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Bond Outlook June 16 2010

Recession to the left and stagflation to the right. Good luck to government on that tightrope! Be grateful for a moderate calm in Europe with the creation of the EFSF.

Bond Outlook [by bridport & cie, June 16th 2010]

Calm has descended on financial markets, but whether that is because of the World Cup or a reflection of a return to genuine stability is unclear. What is now clear, however, is that our description of the recession as “L-shaped”, or to use John Mauldin’s phrase, resulting in a “Muddle-through Economy”, is widely accepted as a fair description of the current economic state of affairs. Bernanke himself says as much but in that special banker’s language which softens the impact of an otherwise strong statement. He talks of a structural budget gap on an unsustainable path. Thus the current calm, welcome though it is, cannot last very long.

 

Governments and central banks continue to walk a tightrope between inflation (actually “stagflation” as it is “cost-push” rather than “demand-pull”) and deflation. Inflation threatens if stimulus is renewed or expanded; deflation if retrenchment (higher interest rates, selling bonds back to the open market) is introduced too soon. We see inflation delayed by months or even years, with low interest rates and low inflation for the medium-term future.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree