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Bond Outlook September 9 2009

It is still no easier to invest, but the arrival of RMB bonds has implications for the structure of currency reserves. Even UNCTAD says one reserve currency is not enough.

Bond Outlook [by bridport & cie, September 9th 2009]

Our contention that global rebalancing is underway, both in terms of GDP and consumption, is now being reinforced by developments on the currency front. China has made a further move towards internationalising the RMB by announcing a government bond issue for global markets. We expect demand to be so high that the yield will be very modest. This move, coupled with growing doubts about the wisdom of having only one reserve currency (and concerns about the strength of that currency), has led to renewed USD weakness which we perceive as secular.


During the Bush/Greenscam era we often described the US Administration as “irresponsible” and see the current crisis as endorsing that view. Sadly, we may have to attach the same epithet to the Obama Administration. We thank Wegelin for drawing attention to the growing aggression of the IRS towards not only its own citizens, but also to anyone who would be so bold as to invest in US securities, or indeed has any other association with the USA such as using it as a base for study.

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