Bond Outlook January 9th
For perhaps the first time in a hundred years, the world economy may be able to expand despite a slowdown, or even a recession, in the USA.
Bond Outlook [by bridport & cie, January 9th 2008]
What is our own answer to our end-of-year question on whether a massive loosening of liquidity can solve a solvency problem? Basically that the operation has worked in the sense that Libor and government bond yields have now moved much closer to each other. The action of the central banks was therefore a wise and necessary action. However, whilst liquidity has improved in the inter-bank market, it would be a big leap to say that the economy is out of the woods. On that issue a distinction has to be made between the USA (and countries such as the United Kingdom that have a significant exposure to a drop in house prices), on which we remain pessimistic, and the rest of the world, about which we remain quite sanguine.