Bond Outlook August 24th
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Bond Outlook August 24th

A summer of quiet changes in Japan, Germany and China, together with signs of an end to the US housing bubble, allow a degree of optimism about world economic rebalancing.

Bond Outlook [by bridport & cie, August 24th 2005]

Rather quietly, over the summer, a number of significant politico-economic changes have appeared, and which, taken together, are quite encouraging in the context of world economic rebalancing:


  • Japan may have turned a corner with a pick up in domestic demand, the end of deflation in sight and the forthcoming election likely to allow Koizumi to proceed with reforms
  • The German economy has returned to growth (and with it the Swiss)
  • Germany under Merkel is likely to continue to turn eastward, depriving France of its main partner in the EU
  • The US housing bubble is looking close to its end
  • Following the Chinese change in its peg policy, Asian countries are diversifying their purchases of foreign Government bonds.


The reason that this is an encouraging mix is that a reduction in US consumer spending is inevitable on the simple grounds that no one, not even a superpower, can live indefinitely beyond their means. The immediate cause of a decrease in spending is likely to be the end of remortgaging as a source of funds.

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