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. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Bond Outlook October 25th

The great debate goes on: will the next change in the Fed rate, some months off, be up or down? Most of the banks think "down" because the US economy will stall; most of the fund managers think "up" because inflation is still threatening. Either way the stock markets are bullish, be that because they expect lower rates, or because the economy will do so well that higher rates will be required, or, rather, justified for the right reason.

Bond Outlook

October 25th 2006

 

 

Fortunately for investors, there is no urgency in deciding which scenario is correct, as the Fed and just about everyone else sees the need to wait and see, especially to understand the full effect of the deflation of the housing bubble. There is universal agreement that the housing effect is negative, but by how much? One view, expressed this week in the FT, for example, considers how the housing markets in the UK, Australia and Holland made soft landings without damage to their economies. It should therefore be likewise for the USA: prices will merely stabilise overall and the landing will be very gentle. The other view sees the housing market getting much worse, with knock-on effects in employment and in household borrowing power (as we rehearsed in this Weekly a month ago, before energy prices fell). So far, mortgage equity withdrawal has slowed but not stopped. When it does, it will become apparent whether cheaper oil is enough to offset much of the lost spending power based on household debt. Then the key question, "Will the US slowdown denote a recession or merely slower growth?"

 

All discussion about Fed rate changes and the US housing bubble are about the medium-term.

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