Bond Outlook April 23rd

The damage done to liquidity in the financial services industry by the credit crisis is slowly on the mend (see “Focus” below), but within an environment of inflation and a US recession. If that description of the financial world is accepted, what does it mean for fixed-income investments? We see three dimensions to a likely answer:

• Continue the shortening process we began three weeks ago
• Venture very cautiously and selectively into the area where mending is taking place, i.e.,