Bond Outlook [by bridport & cie, June 3rd 2009]
| How remarkable that GM can file for bankruptcy protection, endangering hundreds of thousands of jobs, both directly and indirectly, and yet the stock market rally continues unabated. Maybe this best demonstrates the decoupling between financial market performance and the reality of the US economy. The stock market has just about recovered its 2009 losses, LIBOR and bond spreads have returned to normal, and long-term government yields are back to where they were before the crisis. By contrast, in the "real" world, GDP is still falling, house prices have not yet bottomed and unemployment is still rising -- and that is before the full impact of the restructuring of both GM and Chrysler has been felt. |
| Regular readers will have seen us optimistically suggest a timetable for several important milestones being reached by the end of 2009: |
| 1. A return to normal functioning of financial markets (this appears to be happening ahead of schedule) |
| 2. A banking system once again both willing and able to lend directly to companies (not yet in sight, but should happen as a consequence of “1” above) |
| 3. |