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 March 19th

Another Fed boost, another stock rally, but this is all palliative. Inflation and recession in the USA, but the Rest of the World may get off lightly.

Bond Outlook [by bridport & cie, March 19th 2008]

The Fed is getting very good at turning round sentiment for equity markets, but our scepticism remains as to whether the latest cut in the Fed rate, together with opening the discount window to non-banks, addresses the basic problems of a deficit economy, falling house prices and overuse of leverage. In fact, nothing has changed: the US authorities have decided to return to their old standby of cheap money, while paying no more than lip service to inflation. Most other economies have central banks which are still serious about inflation and will delay taking the path of the Fed for as long as possible. Even the BoE, which has presided over a GBP falling almost as much as the USD, is announcing that “holding down inflation is the absolute key”. There is only one way to control inflation with a weak currency: keep interest rates high and accept an economic slowdown. The alternative of lowering the rates can only accelerate a currency’s fall and associated inflation. Yet that is precisely the Fed policy!

 

We have recommended long maturities in USD and EUR on the grounds that recessionary pressures, including low short-term yield (which tend to keep long-term yields down), outweigh inflationary pressures (which push them up).

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