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.
FOREIGN EXCHANGE

Bond Outlook September 6th

We consider four economic scenarios ranging from “Goldilocks” to “Catastrophe”, and argue for the one we favour (a fairly soft landing), while admitting a risk of something worse.

Bond Outlook [by bridport & cie, September 6th 2006]

The questions we have raised in recent weeks reflect the great incertitude and broad range of opinion on whither the US and the world economy. Although possible outlooks really fall on a continuous spectrum, we count four scenarios receiving support from various parts of the investing community:

 

  1. “Goldilocks”: a US economy which is neither too hot nor too cold – basically a continuation of the recent years with households still spending and foreigners supplying the capital to cover the current account deficit.
  2. A mild slowdown: a reduction in mortgage equity withdrawal slows growth without quite conquering inflation. However, the US economy is able to withstand the required further interest rate rises. Consumers in Europe, Japan and in the developing world compensate the modest slowdown in US consumption.
  3. A recession: US households reduce spending drastically and turn to saving. Inflation is still not conquered, but the Fed dare not raise rates further, preferring stagflation over a worsening recession. The knock-on effect is global as consumers elsewhere cannot sufficiently increase their spending.

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