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. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Bond Outlook by bridport & cie, May 11 2011

Consider the parallel between the USA and China today and the USA and UK of yesteryear. Massive indebtedness of one country another implies ceding much power to the creditor nation.

Bond Outlook

In the space of only a week, the prices of many commodities have fallen sharply, and then, to varying degrees, staged similarly dramatic recoveries, causing a modest bounce in the USD, and a decline in Treasury yields. We see these events as short-lived “saw-tooth” movements in the secular decline of the dollar and the long-term appreciation of commodity prices, as well as a reminder of the inherent volatility of commodities when the financial muscle of speculators is so much greater than those who use the markets for conventional hedging purposes. Since we still expect a steepening of yield curves due to borrowing both by the US Treasury and by “Federal” Europe through the future European Stability Mechanism, the decline in long-term yields is best seen as an opportunity to shorten durations.


The debate over whether Greece and other euro zone peripherals will restructure or not continues (a departure from the euro zone seems to have been dismissed). However, the views that we have developed in recent months still hold:


  • the strong members of the euro zone, led by Germany, have the means and the will (at government, if not popular level) to bail out the prodigals in the short term
  • their motives have more to do with protecting the EUR and their own banks rather than anything more altruistic !
  • Greece however cannot ever pay back its debts at 100%, therefore some sort of haircut for its bondholders is inevitable
  • European authorities and the IMF will do whatever is necessary to avoid a “credit event”
  • haircuts are likely to be instigated via “voluntary” or “soft” restructuring such as tender offers by the issuer
  • at least some of the peripherals’ debt will be bought up from the market at distressed prices, using funds raised by bonds issued at the EU level by either the European Financial Stability Facility or its successor, the European Stability Mechanism


We would like to reflect (with acknowledgement to Time magazine) on the slow movement away from the USD as the world’s dominant reserve and trading currency.

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.


Unlimited access to and

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


Unlimited access to and, 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


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