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.

Bond Outlook September 19th

Bernanke has put sticking plaster on the wound, a necessary but insufficient move. The problems of overspending and housing remain, and the immediate credit crisis has yet to be solved.

Bond Outlook [by bridport & cie, September 19th 2007]

The essential first aid has been applied, brandy has been given to the victim, who has shown signs of life. Are those signs - the surge in stock markets - really evidence of a full recovery? Alas, no, for the underlying wounds have not been addressed:

  • US households must eventually match revenues to expenditure as otherwise this will just be another turn of the wheel before it falls off altogether
  • The bubble in housing must continue to deflate, i.e. lower construction activity and lower prices until demand again matches supply

Even the repercussions of these underlying causes, sub-prime failures, CDOs and the credit squeeze, cannot be eliminated by a lower Fed rate, although we dare hope that inter-bank lending will gradually return over the coming months. Whether it does so in time to prevent the US recession that we alluded to last week remains to be seen.

The Fed cannot be blamed for loosening in face of the present threat of recession, any more than the BoE can be condemned for being forced to accept the Government’s orders to bail out savers of Northern Rock.

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