Thought of the Day

15-AUG-08   United States
Equities are more sanguine about the business outlook than is the corporate credit market ... A plunge in oil prices to under $100 per barrel by the end of September would justify the recent drop in stock price volatility ... Treasury yields now anticipate lower commodity prices.

14-AUG-08   United States
Declining prices for oil and other industrial commodities, as well as the disinflationary effect of rising unemployment, diminished the significance of July's fastest annual rate of CPI inflation since January 1991 ... Recent state jobless benefits data had troubling implications for economy and earnings.

13-AUG-08   United States
August 13th's gains by oil prices and Treasury bond yields reinforced the accompanying slide by equity prices and concurrent widening of CDX credit risk premia.

12-AUG-08   United States
If, despite a continued slide by energy prices, the US economy deteriorates significantly from Q3-08 to Q4-08, the FOMC probably will cut rates at its December 16 meeting, while the 10-year Treasury yield drops to a range of 4.5% to 4.75% ... A global slowing of world expenditures implies that both the ECB and Bank of England also are likely to cut rates by year's end.

11-AUG-08   United States
Q3-08's broad tightening of bank loan standards underscores the US economy's considerable downside risks ... Diminished access to bank credit will be disnflationary ... Recent 5-year TIPS contract reveals a material drop in inflation expectations.

08-AUG-08   United States
Some claim eight is a lucky number and maybe that explains 8/8/08's big gains by equities and the dollar ... For the near-term, downside risks faced by earnings and the economy well outweigh any upside potential ... Wide credit risk premia imply growth will be curbed by above-average risk aversion.

07-AUG-08   United States
Prospects for consumer spending worsened as jobless claims climbed up to a recessionary range ... Although credit risks rose, at least interest rate risks were trimmed by the latest indication of a disinflationary labor market ... A Fed rate hike may have to wait until mid-2009 at the earliest.

06-AUG-08   United States
Thus far, credit risk premia have shown a muted response to the latest firming of equity prices ... The market value of US common stock is still well under where it was when CDX spreads last bottomed in mid-May ... The latest drop in oil prices has not been deep enough to materially diminish macro risks.

05-AUG-08   United States
An extended slide by oil prices will do far more than slash inflation risks ... much reduced energy costs also will reduce risk aversion and boost real spending by enough so that the US avoids a double-dip slump.

04-AUG-08   United States
Slumping commodity prices brought attention to slower global expenditures that will endanger the US economy's one bright spot -- exports ... Corporate credit risk premia will remain wide until rates of resource utilization show signs of climbing higher.

01-AUG-08   United States
July's seasonally-adjusted unit sales pace for cars and light trucks in the US plunged to its lowest reading since April 1992 despite the stimulus of rebate checks ... Absent sharply lower oil prices, a further deterioration of the economy seems unavoidable.

31-JUL-08   United States
Widespread expectations of a marked second-half deceleration of economic activity imply that a bottom for the current credit downswing is not yet in sight ... The credit cycle may not turn higher until mid-2009.

30-JUL-08   United States
Reflecting the lack of any conclusive evidence of an important turning point for corporate earnings, credit spreads have responded cautiously to recent equity price advances and declines in stock price volatility.

29-JUL-08   United States
As oil prices sink, bottoms draw closer for both the financial markets and the US economy.

28-JUL-08   United States
A stabilization of home sales and an easing of credit stress require a 10-year Treasury yield of less than 4% ... The longer is the stay of wide credit risk premia, the greater is the danger of a retrenchment of business spending.

25-JUL-08   United States
Wisely, markets are skeptical of recent better than expected news on durable goods orders, new home sales, and consumer sentiment ... An oil price shock on top of a credit crunch warns against extrapolating too much from a limited number of upside surprises.

24-JUL-08   United States
The noxious mix of an oil price shock and credit crunch now slows the world economy ... Recent news from Asia hints of an impending deceleration of US exports that all but assures a quarterly contraction of US real GDP ... Oil is one of the worst "safe havens" imaginable from the perspective of macroeconomic performance.

23-JUL-08   United States
The recent "jawboning" of high ranking Fed officials may help to curb inflation expectations ... Effective "jawboning" would preclude the need for a Fed rate hike amid declining rates of resource utilization.

22-JUL-08   United States
The US economy requires more in the way of oil price deflation ... Unless the price of crude is no greater than $100 per barrel soon after Labor Day, a harsh slowdown may materialize by Q4-08.

21-JUL-08   United States
A counter-cyclical surge by energy prices amid a deflationary credit crunch favors a -0.7% annualized quarterly contraction for Q4-08's real GDP ... Absent sharply lower oil prices, recession may be difficult to avoid.

18-JUL-08   United States
Expectations of a rising default rate limit the scope of any thinning of high-yield bond spreads ... nonetheless, an extended slide by oil prices might be enough to narrow the recent 767 basis points yield spread of high-yield bonds to a range of 600 to 650 points.

17-JUL-08   United States
An oil price shock on top of a credit crunch seems like a toxic mix for the US economy ... Thus the latest drop by oil prices improves the economic outlook and helps to narrow credit risk premia.

15-JUL-08   United States
Sharply lower energy prices are necessary for any near-term stabilization of the economic outlook. Rate cuts are of secondary importance. Hence, markets again failed to respond positively Bernanke's Congressional testimony.

14-JUL-08   United States
The likelihood of a Federal Reserve rate hike diminishes day by day as negative momentum for housing has yet to abate and ever more financial institutions fall into crisis mode.

10-JUL-08   United States
In what remains a mild recession for employment should prevent US consumer spending from falling into the abyss ... still the woeful outlook for housing warns against complacency.

09-JUL-08   United States
Neither the investment-grade nor high-yield CDX credit default swap spread index swelled in reaction to July 9's deep drop in share prices, suggesting that Wednesday's equity market sell-off was overdone.

08-JUL-08   United States
Base metals prices imply that crude oil's price could drop considerably to the obvious benefit of most financial assets.

07-JUL-08   United States
A deep drop by oil prices might allay growing worry over the economic outlook ... Otherwise, look for continued weakness in housing to pressure financial institutions.

03-JUL-08   United States
June's weak employment report gave no indication of an impending bottom for US economic activity, which all but rules out a Fed rate hike and warns of further deterioration for the macro drivers of corporate credit worth.

02-JUL-08   United States
Bearish sentiment dominates as ominous developments now receive a much greater weight than positive news ... Bearishness may be overdone, but neither profits nor the high yield bond default rate has yet to signal a turn for the better.

01-JUL-08   United States
The ISM's surprisingly resilient factory index does not refute a general dimunition of corporate credit worth ... June's extraordinarily weak motor vehicle sales show just how damaging record high energy prices can be to the overall economy.

30-JUN-08   United States
A slowing of unit labor costs offsets the narrowing of profit margins by commodity price inflation ... still, in response to the damage that skyrocketing energy costs can do a weak economy that has a low tolerance for heightened uncertainty and higher Treasury bond yields, high-yield bond spreads ballooned in June .

27-JUN-08   United States
Rebates have supplied valuable support to consumer spending and might yet prompt an upside surprise for growth in general, especially if oil prices recede ... Oil prices are now very steep relative to base metals prices, suggesting considerable downside risk for oil prices.

26-JUN-08   United States
Despite passable economic news, stock prices plunged in response to fears of an oil-price-surge-driven drop in business activity.

25-JUN-08   United States
Many are of the opinion that downside economic risks have not declined since April 30's FOMC meeting. After all, from April 29 until recently, the market value of US common stock fell by -3.5%, while many broad indices of corporate credit risk widened significantly.

24-JUN-08   United States
In June, the expectations of US consumers revealed fears of the worst performance by personal income on record and the highest rate of CPI inflation since the early 1980s ... We think June's record low reading on consumer expectations speaks volumes about the US economy's current predicament.

20-JUN-08   United States
A sinking equity market worsens prospects for both credit and the overall economy ... A soft US economy preserves the possibility of another drop by short- and long-term Treasury yields, including more in the way of Fed stimulus.

19-JUN-08   United States
Rising mortgage yields should delay a stabilization of home sales and put more downward pressure on residential real estate prices.

18-JUN-08   United States
A disinflationary monetary policy amid severe home price deflation warns of more mortgage-related write-offs and thinner net interest margins, both of which could impair the lending capabilities of US banks.

17-JUN-08   United States
The Fed's unlikely to hike rates amid rising unemployment and a declining rate of industrial capacity utilization ... A major narrowing of corporate bond yield spreads must wait patiently for a peaking of the high-yield downgrade ratio.

16-JUN-08   United States
The NAHB's housing market index for June fell to a record low ... If it's premature to declare a bottom for housing, then the US economy remains at risk and another slide by Treasury yields cannot be dismissed.

16-JUN-08   United States
Rate hike is far from imminent according to containment of core CPI inflation and consumer sentiment's 28-year low.

13-JUN-08   United States
Rate hike is far from imminent according to containment of core CPI inflation and consumer sentimaent's 28-year low.

11-JUN-08   United States
Previous easings of fed funds did not end until improvements in credit market conditions were much more convincing than the current situation ... Investors now fret that the Fed again overestimates the economy's underlying strength.

10-JUN-08   United States
It's too early to fret about the nearness of a Fed rate hike, unless a worsened inflation outlook and a plunging dollar exchange rate put unwanted upward pressure on Treasury bond yields

09-JUN-08   United States
Financial markets have yet to strengthen by enough to allow for a Fed rate hike, which may be an unduly bold action given how a fundamentally soft economy should block the sustained proliferation of breakneck food and energy price inflation.

06-JUN-08   United States
To the degree a lower dollar fuels oil price inflation, central bankers need to be careful about not putting unwanted downward pressure on the dollar through either words or actions.

05-JUN-08   United States
Stocks rallied and credit spreads narrowed in response to growing confidence in the likelihood of a Q2-08 bottom for US economic activity. Will the May employment report confirm the improved view of second-half prospects?

04-JUN-08   United States
The US consumers' lowest income expectations on record favor a containment of unit labor costs that should both benefit profitability and limit any rise by unemployment ... Inflation would be a much bigger danger if expectations of both inflation and income growth were rising sharply together.

03-JUN-08   United States
Worry over the adequacy of economic growth slashed share prices and lowered Treasury yields ... Fast-sinking financial markets and a struggling economy would supercede the dollar exchange rate as far as giving direction to Fed policy ... May's worst showing by auto sales since Jul-98 warns not to write-off recession risks.

02-JUN-08   United States
Oil's record-high price will not persist indefinitely amid declining prices for other industrial commodities ... Stocks moved lower not only because of burdensome energy prices, but also in recognition of the credit market's still elevated level of stress.

30-MAY-08   United States
A deceleration of employment income will prevent a lasting climb by core inflation ... Prime financial- and nonfinancial-company CP rates are now at unusually deep discounts relative to LIBOR.

29-MAY-08   United States
Just as it did exactly one year ago, the Treasury bond market now overestimates the underlying vitality of the US economy. Higher mortgage yields will worsen housing's plight and intensify home price deflation.

28-MAY-08   United States
Recent 66 basis points premium of 2-year Treasury over fed funds -- the widest in 38 months -- hints of a moderation of current economic slump, but does not preclude more rate cuts.

27-MAY-08   United States
Although broad equity indices managed to transcend the worst reading on US consumer expectations since December 1973, only the brave dare to declare impending bottoms for both housing and the US economy.

27-MAY-08   United States
Although broad equity indices managed to transcend the worst reading on US consumer expectations since December 1973, only the brave dare to declare impending bottoms for both housing and the US economy.

23-MAY-08   United States
An ongoing decline by base metals prices may be a preview of what awaits energy prices.

22-MAY-08   United States
The US labor market isn't tight enough to "fund" a lasting upturn by core inflation and the US economy isn't strong enough to shoulder higher benchmark Treasury yields.

21-MAY-08   United States
A bottoming of fed funds at the current 2% probably requires a Q2-08 bottoming of US economic activity.

20-MAY-08   United States
If equities enter into another extended slide, a widening of corporate credit risk premia probably will resume.

19-MAY-08   United States
Recent leading indicators suggest the US' current slump may be less severe than any previous recession since WWII. Nonethelees, little more than a rising default rate will limit any narrowing of corporate credit risk premia.

16-MAY-08   United States
To state that fed funds will bottom at its current 2% is equivalent to declaring a impending trough for economic activity.

14-MAY-08   United States
Core inflation running at well under 3% annualy is a historically tolerable level that should place the current severe home price deflation as the top priority for policymakers.

14-MAY-08   United States
Whether or not we technically avoid a recession, the poor outlook for the US consumer assures subpar growth stretching well into 2009.

13-MAY-08   United States
If Fed policymakers focus more intently on headline inflation, then perhaps the US economy now forms a rock-solid bottom.

12-MAY-08   United States
US profitability has thus far avoided its deeper slide of 2001 ... LIBOR's deep year-to-year drop should curb intetest expense and help prevent a pronounced re-widening of spreads.

09-MAY-08   United States
Ever climbing energy prices and persistent home price deflation will preserve a heightened sense of anxiety among consumers, businesses, creditors and borrowers.

08-MAY-08   United States
More good news on jobless claims would help to limit consumer spending's downside risks.

07-MAY-08   United States
With no bottom in sight for home sales and no top in sight for energy prices, investors sold equities and demanded greater compensation for credit risk.

06-MAY-08   United States
Rising mortgage yields and declining consumer confidence only delay a stabilization of home sales, where fewer home sales intensify the downward presssure being put on home prices.

06-MAY-08   United States
Rising mortgage yields and declining consumer confidence only delay a stabilization of home sales, where fewer home sales intensify the downward presssure being put on home prices.

06-MAY-08   United States
Outside of housing, banking, retailing and motor vehicles, the latest slump lacks the severity of previous recessions ... Nonetheless, Q2-08's tightening of bank lending standards warns of subpar growth.

02-MAY-08   United States
A shallower than expected decline by April's payrolls and a lower unemployment rate were offset by fewer hours of work and indications of slower income growth ... Despite indications of an oversold credit market, the fundamentals have yet to reveal a broad-based improvement in corporate credit worth.

01-MAY-08   United States
Fewer jobs, slower income growth, record low expectations for income growth, burdensome energy costs, stringent lending standards, the fewest home sales since the autumn of 1997, and unexpectedly deep home price deflation warn of decidedly subpar consumer spending.

30-APR-08   United States
Technically speaking, the US avoids recession by a hair's breadth, while the Fed sounds far from convinced that stabilization impends.

29-APR-08   United States
Recent deep declines by consumer confidence warn of more in the way of subpar household expenditures ... April's index of consumer income expectations sank to a record low implying that core inflation will be well contained.

28-APR-08   United States
CDX spreads extended their narrowing at the start of a big week for Fed policy and economic data ... but burdensome energy costs might yet worsen prospects by enough to re-widen credit risk premia ... complacency is ill advised, after all the high-yield spread formed four distinct peaks during 1998-2002.

23-APR-08   United States
The US' worsened distribution of high-yield credit rating revisions still compares favorably to what held immediately before and during the recessions of 2001 and 1990-1991 ... Perhaps the high-yield bond default rate will fall considerably short of its two previous peaks of 2002 and 1991.

22-APR-08   United States
Just when a hint of an impending stabilization of home sales arrives, surging oil prices worsen the economic outlook ... Any curbing of oil price inflation might best be handled by policymakers outside the Fed.

21-APR-08   United States
The Fed may be nearly finished with paring rates if only because of the now much lower real fed funds rate compared with the two previous recessions. Nonetheless, the downside risks to US growth remain great enough to favor at least a 50 basis points cutting of fed funds at the April 30th meeting of the FOMC.

18-APR-08   United States
The latest firming of financial markets ought to boost the confidence of both businesses and consumers, while also increasing the supply of financial capital.

17-APR-08   United States
What transpired in 2001-2003 warns that a possible narrowing of the Fed's likely interest rate reduction of April 30 from March 18's 50 basis points to 25 points offers no assurance of an approaching end to the latest series of Fed rate cuts.

16-APR-08   United States
Despite the good news of the equity market's latest advance, crude oil's accompanying price surge threatens to further reduce household purchasing power and squeeze profit margins. Downside risks still dominate the US' upside potential.

15-APR-08   United States
Surge by crude oil prices only adds to US economy's downside risks ... Still, Fed's probably more worried about home price deflation than about a jump in energy inflation that has yet to boost the underlying rate of core inflation.

14-APR-08   United States
US consumer spending struggles as Q1-08's core retail sales posted smallest annual increase since the recession-bound final quarter of 2001.

11-APR-08   United States
Global exposure prevented the disappointing Q1-08 results of one major US conglomerate from being much worse ... Plunge by 7-day prime non-ABS CP rate favors significantly lower LIBOR by summer.

10-APR-08   United States
Although same store sales are faring much worse than they did during 2001's recession, the labor market seems to be holding up better, while, in a radical departure from the last recession, US exports now boom. US companies with global reach may surprise on the upside.

09-APR-08   United States
Nonfinancial companies have entered the current business cycle slump in comparatively decent financial condition, on balance. Practically all aggregate measures of nonfinancial-corporate health are superior to their respective readings of the two previous recessions.

08-APR-08   United States
At long last, the Fed all but admitted to the presence of a recession, which favors a fed funds rate no higher than 1.5% by summer.

07-APR-08   United States
First quarter earnings will mark the seventh consecutive quarter of declining profit growth when the median change in quarterly net income is measured at a moving yearlong rate. This profit drain saps debt repayment capacity, which justifies much of the rise in credit risk premia, and guarantees a higher default rate.

07-APR-08   United States
First quarter earnings will mark the seventh consecutive quarter of declining profit growth when the median change in quarterly net income is measured at a moving yearlong rate. This profit drain saps debt repayment capacity, which justifies much of rise in credit risk premia, and guarantees a higher default rate.

04-APR-08   United States
The current labor market slump still lacks the severity of 2001's recession. Nonetheless, consumer spending probably got hammered in March as nearly anything that could go wrong did. Little more than previous and forthcoming monetary and fiscal stimuli should moderate the performances of employment and cobnsumer spending in the months ahead.

04-APR-08   United States
Previous and forthcoming Fed rate cuts, extraordinary efforts to enhance financial system liquidity, and impending fiscal stimulus should curb joblessness and firm consumer spending in the months ahead. Basically, monetary and fiscal stimulus will make itself known by Q3-08.

03-APR-08   United States
Jobless claims and the ISM's service index warn of a subpar economy that should sustain bond yield spreads at well-above-trend widths ... Still, compared to Q1-08, the high-yield upgrade ratio fared worse prior to, during, and immediately after 2001's recession.

02-APR-08   United States
Ben Bernanke was quite guarded about near-term prospects for the US economy. Barring a slew of better than expected readings on the US economy, a marked thinning of corporate credit risk premia, and at least a mild rally by equities, the fed funds rate should be no greater than 1.75% at the end of the next April 30th meeting of the FOMC.

01-APR-08   United States
The equity market is beginning to sense nothing worse than a mild recession, which should ease credit market stress.

31-MAR-08   United States
The still brisk pace of commodity price inflation owes more to the robust growth of emerging market ecopnomies than to a re-flationary Fed policy ... Not since the US' mild recession of 1970 has world economic growth been so lively amid a slumping US economy.

28-MAR-08   United States
Economic news has fallen considerably short of what otherwise might ease risk aversion. For now, risk aversion may be curbing expenditures by enough to prompt a further tightening of lending standards. The US economy needs a positive shock.

27-MAR-08   United States
Q4-07's GDP accounts showed that profits margins and interest coverage are much stronger than at the start of the 2001 recession. Thus, not only will nonfinancial companies be better able to withstand adverse developments than otherwise, but now wide bond yield spreads could thin considerably once macroeconomic risks subside.

26-MAR-08   United States
New home sales eclipsed expectations and, absent a plunge by machinery orders, February's durable goods orders grew ... High yield bond spreads seem very wide vis-a-vis the group's median EDF and considerably less so relative to highest monthly VIX since Mar-03.

25-MAR-08   United States
Along with a shrinkage of job opportunities and higher prices for food and energy, record home price deflation diminishes consumer confidence ... A material thinning of corporate credit risk premia requires a lessening of the US economy's downside risks.

24-MAR-08   United States
The current recession may be comparatively mild according to now rising share prices and the slope of the Treasury yield curve, never mind the extraordinary efforts to boost liquidity and forthcomong fiscal stimulus. Feb-08's monthly rise by existing home sales preserves the possibility of a stabilization of home sales by mid-2008.

21-MAR-08   United States
A closed U.S. market offered breathes of fresh air after a week of great volatility. The cut in the federal funds rate on Tuesday offered some short-term relief to the 30-year treasury rate as the LIBOR rate continues to decline. With the PPI coming in lower than expected it is safe to say that at this time regulatory bodies will maintain their focus on the deteriorating residential markets and not on the dissipating inflation concerns.

20-MAR-08   United States
Today's severe bout of home price deflation may lack precedent going back 70 years, but comparatively healthy corporate finances and the still robust growth of dynamic emerging market economies also distinguish the US economy’s current slump from previous downturns.

19-MAR-08   United States
Fear still grips the financial markets. Nonetheless, despite extraordinarily wide offering yield spreads over Treasuries (that might well be significantly thinner a year from now), US investment grade companies issued at least $5.5 billion of bonds today. Once again, new high yield offerings were absent.

18-MAR-08   United States
Today's equity market rally highlighted the effectiveness of the Fed's latest rate cut and policy statement ... Fed policy is very much geared towrad boosting the market value of US common stock.

18-MAR-08   Europe
The Bear Stearns collapse continues to unnerve financial markets. The loss of trust and the need for banks to hoard cash has strained short-term money markets as libor rates remain elevated. The widely expected cut by the Federal Reserve should restore some confidence in financial markets.

17-MAR-08   Europe
Financial markets reacted negatively to the bailout of Bear Sterns, and the liquidity injections provided by the Federal Reserve and major central banks. This suggests that the worse is far from over yet, and more casualties will likely emerge.

14-MAR-08   Europe
An ECB interest rate cut could ease inflationary pressures in the euro zone and push up short dated bond prices further. As a rate cut will cause the dollar to weaken, helping to reduce the pressure off rising oil prices, which are priced in dollars.

13-MAR-08   Europe
The euro zone yield curve seemed to have stabilized somewhat on recent euro zone data releases, which showed the economy remain resilient. The flattening of the yield curve is likely to be temporary however, we expect further steepening.

12-MAR-08   Europe
European debt issuances weakened in February, and are likely to remain so in the short-term. The European Central Bank will likely cut interest rates during mid-year; this should help to restore confidence in the issuance markets.

11-MAR-08   Europe
Europe's central banks turn to open-market operations today as liquidity stay painfully absent in financial markets.

10-MAR-08   Europe
Interbank rates will remain elevated in Europe. The ECB remains hawkish regarding inflation, despite increased concerns over the euro's exchange rate whilst commercial banks remain risk averse.

06-MAR-08   Europe
The yields curve for the bund continue to steepen as markets expect the euro zone economy will slow and interest rates will be cut later this year. The implied interest rates on euro futures rose since last Friday to 4.20% from 4.11%, suggesting the probability of an ECB rate cut by mid-June may be too early, and it could be delayed until the third quarter.

05-MAR-08   Europe
Euro and sterling short-term money market rates are rising again. Financial institutions are hoarding cash once again and limiting short-term borrowing to other financial institutions as they grapple with sub prime related losses.

04-MAR-08   Europe
European government bonds strengthened today as investors sold on weaker economic data from the euro zone. Fourth quarter GDP figures for the euro zone was revised downwards, a reflection that economic activity is slowing. Nervous investors moved out of equities and into safe havens, resulting in falling yields.

03-MAR-08   Europe
Financial markets are now focusing on the BoE and ECB monetary policy decisions this Thursday. This is likely to be bad news for bunds and gilts, since both central banks are expected to keep rates on hold.

28-FEB-08   Europe
European bourses were hit by the rapidly rising price of Europe's benchmark Brent crude oil (forward dated), reaching a fresh high of just over $100 per barrel on Thursday.

27-FEB-08   Europe
We have noted for some time now that the relative strength of the euro has much to do with the prevailing weakness of the U.S. economy. Yesterday’s string of bad news did little to help the greenback, sending the euro to a record high $1.5057 in early European trading.

26-FEB-08   Europe
European government bonds weakened on the back of a rebound in the German IFO business sentiment index. Despite the surprise rise in confidence, the fourth quarter GDP for Germany, the euro zone’s largest economy shows signs of weakening. The bund has weakened temporarily, given a further slowdown in economic activity is expected this year, the trend for the performance of the bund remain on the upside.

22-FEB-08   Europe
European government bonds rose today as investors brought bonds on the back of falling equities. The release of weak earning results as well as downward revisions to earning estimates across the Atlantic has spooked financial markets, resulting in investors buying into safe haven assets.

21-FEB-08   Europe
Short-and long dated gilts weakened on stronger U.K. retail sales data, pushing up yields. Though, this scenario is unlikely to last, given U.K. growth is expected to slow. The likely slowdown will put downward pressure on yields. We expect gilts will outperform equities in the short term.

20-FEB-08   Europe
European government bonds weakened today as investors sold on the release of stronger economic data which show inflationary pressures remain elevated. The euro zone producer prices rose by more than expected, whilst the short-and long dated gilt fell on stronger U.K. M4 money growth data. Yields on government bonds rose, resulting in falling prices.

19-FEB-08   Europe
European government bonds have continued to weaken as investors take advantage of rising equities. Despite, the continuance of sub prime write-downs by the banking sector, equities have risen on the back of the commodity sector. Yields on government bonds rose today, resulting in falling prices.

18-FEB-08   Europe
Gilts weakened as investors sold out of safe haven assets to take advantage of gains from European equities. The FTSE gained on announcements of dividend increases by some financial institutions, signalling that the worse may be over and that we may have seen the last of sub prime write-downs for the U.K. banks. Yields on government bonds rose, resulting in falling prices.

15-FEB-08   Europe
European government bonds strengthened today as investors sold out of equities on reports of further sub prime write-downs. Yields on government bonds fell, resulting in rising prices.

14-FEB-08   Europe
Despite the slowdown in the euro zone as reflected by the release of the flash estimate for fourth-quarter GDP, government bond prices faltered. It seems investors are focusing their concern on rising inflationary pressures. Preliminary euro zone CPI for February shows a rise in consumer prices. The yield on a bund for both the short-and long dated maturities rose as a result.

13-FEB-08   Europe
The yield on the short-dated gilts rose on the release of stronger U.K. employment data. Furthermore, today’s inflation report signalled that the BoE may not cut interest rates by as much as financial markets expect, putting further pressures on the yield.

12-FEB-08   Europe
The yield on a short-and long dated gilt rose sharply today on the release of U.K. CPI numbers, which showed consumer prices rising. This has reduced the BoE's ability of cut rates aggressively in order to shore up weakening growth. We expect however, government bonds will continue to outperform equities this quarter, as investors demand for safe haven assets is unlikely to wane.

11-FEB-08   Europe
The yield on a short-and long dated gilt rose sharply today on the release of U.K. PPI numbers which showed producer prices accelerating. This has reduced the BoE's ability of cut rates by more than projected in the face of weakening growth. We expect however, government bonds will continue to outperform equities this quarter, as investors demand for safe haven assets is unlikely to wane.

08-FEB-08   Europe
Euro zone government bonds continued to strengthen, as risk adverse investors move out of riskier assets. The yields on the euro zone government bonds vary however, as investors differentiate on the relative performance of the euro zone economies and the soundness of their fiscals.

07-FEB-08   Europe
European bonds gained on Trichet’s speech which signalled that monetary policy may possibly be loosened on weakening euro zone outlook. The spread differential on the 2-and 10 year bunds widened by 13 basis points as investors expect short term ECB rates to fall.

06-FEB-08   Europe
The U.K. gilt is likely to outperform on the expected BoE rate cut tomorrow. Further rate cuts are expected. We anticipate U.K. monetary policy rates will be at 5.0% by year end. The slowdown in the U.K. economy as well as the possibility of a U.S. recession will likely provide further support to the performance of safe haven assets such as government bonds this year.

05-FEB-08   Europe
European bonds strengthened today on the release of softer euro zone services PMI data. Investors are now increasingly focused on the possibility of an ECB rate cut during the third quarter as the euro zone growth weakens, weighed down by the increasing possibility of a U.S. recession. This resulted in yields falling on both the short-and long dated bonds.

04-FEB-08   Europe
European government bonds weakened on stronger euro zone producer prices. Investors seemed to be concerned about inflation rather than further deceleration in the euro zone economic growth. This resulted in a rise of short-and medium term yields as investors moved out of bonds.

01-FEB-08   Europe
Borrowing costs in the U.K. are beginning to loosen, with the 3 month sterling Libor now 5.6%, from 6.6% in December. The BoE will cut its base rate by 25 basis points next week. For more, please see Special Comments, European Credit Trends - 2007 Review & 2008 Outlook.

31-JAN-08   Europe
Spreads will remain high for European corporate issuers, even if European central banks lower their interest rates. For a full analysis, please see Special Comments, European Credit Trends - 2007 Review & 2008 Outlook.

30-JAN-08   Europe
Rising downside risks to economic growth in the euro zone, with rapid currency appreciation hastened by further interest rate cuts from the U.S. Federal Reserve, may be changing attitudes at the European Central Bank. If tomorrow's flash consumer price inflation estimate for January shows no further acceleration, the ECB may start considering a rate cut of its own.

29-JAN-08   Europe
ven though interest rate futures showed markets had already priced in cuts from the U.S. Fed and the Bank of England, bond markets reacted sharply today. Gilt yields increased throughout the day, with the U.K.'s 2 and 10-year benchmark bond yields each tacking on 10 extra basis points. The modest improvement in credit quality perceptions was also reflected by a slip in credit default swap indices.

28-JAN-08   Europe
Homeowners in the U.K. are heavily indebted, facing high interest rates, a softening housing market, and weaker employment growth. All this points to reduced consumption growth and gives the BoE room to ease. Markets expect the BoE to cut its base rate by a quarter point in February, with a second quarter-point cut in June now anticipated.

23-JAN-08   Europe
European equity markets remain unsettled as investors worry about the increasing likelihood of a U.S. recession. Economic data signal that the U.S. is moving in that direction, and could even possibly be in recession. Corporate credit and equity markets are on two sides of the same coin when the economy is slowing. A slowdown in activity will result in rising defaults, a widening of spreads and falling bond prices. European credit markets continue to weaken, this time it may be the possibility

22-JAN-08   Europe
Markets are likely to turn their collective attention toward whether or not the Fed's 75 basis point cut suggests that the central bank knows more than it is letting on, and whether or not European central banks will follow suit.

21-JAN-08   Europe
The increasingly uncertain outlook surrounding U.S. and European growth prospects offered fresh support to U.K. and euro land fixed income markets, with gilts and bunds trading higher to the detriment of equity bourses.

18-JAN-08   Europe
European bourses continued to take a battering as nervous investors moved out of risky assets and sought safe havens. The yields on short-dated euro zone government bonds continue to fall despite lack of European economic data released today. Weakening economic outlook rather than rising inflation remain the key concern.

17-JAN-08   Europe
Euro Libor spreads has narrowed against the ECB base rate, a reflection of easing tensions in the short term financing markets. However, European CDS spreads for senior financials continue to rise, suggesting whilst short term liquidity might be easing, the likelihood of defaults on the European financial sector are rising.

16-JAN-08   Europe
European fixed income strengthened again on slower price growth. German CPI released showed inflation easing whilst overall euro zone CPI remains stable. The yield fell as a result, providing strong gains for short dated two year government bonds.

15-JAN-08   Europe
Investor’s confidence took another battering today on the release of the German ZEW indicator. European government bonds advanced again as a result, resulting in yields falling on both the short and long dated end.

14-JAN-08   Europe
European government bonds continue to strengthen as risk adverse investors move into safe haven assets. The yields fell on short-dated bonds as a result. The fall in yields on short dated bonds is also a reflection of falling interest rate expectations as investors expect the euro zone economy to slow down this year.

11-JAN-08   Europe
Short-dated European government bonds strengthened today as risk adverse investors sought safe haven assets. Investors moved out of equities which have performed dismally recently weighed down by the deteriorating U.S. economic outlook as well as inflation. Yields on two year European bonds were lower, whilst on the long-dated bonds were mostly flat today.

10-JAN-08   Europe
European bond yields were little changed today as the BoE and ECB held rates steady earlier on Thursday and as widely expected. Markets expect the BoE to cut rates two more times before June. The long-dated gilt will continue to be supported by softening interest rate expectations as well as weakening economic fundamentals.

09-JAN-08   Europe
European government bonds strengthened today on weaker German retail sales and industrial production numbers. Yields fell as a result. Markets are now waiting for tomorrow’s monetary policy decisions by the BoE and ECB. A hold on rates is expected; this will put further downward pressure on yields.

08-JAN-08   Europe
European government bonds continued to weaken on stronger than expected German manufacturing data. Investors are increasingly concerned about inflation rather than a slowdown in the euro zone economy, resulting in yields rising.

07-JAN-08   Europe
European government bonds weakened on stronger than expected euro zone producer prices. Investors are increasingly concerned about inflation rather than a slowdown in the euro zone economy, resulting in yields rising. The ECB is expected to hold interest rates when they meet this Thursday, which could put increasing upward pressure on yields.

07-JAN-08   Europe
The European Central Bank is widely expected not to lower its interest rate at its first monetary policy meeting of the year this Thursday.

04-JAN-08   Europe
U.K. wages surprises on the upside. This makes the BoE job more difficult when meeting next week to decide on interest rates. A cut may be necessary to alleviate problems in the financial markets. Investors on the other hand, continue to be worried about the weakening economic outlook, as a result yields on the long dated gilt have fallen.

03-JAN-08   Europe
Investors continue to be nervous on the outlook for the U.S. economy. The recent surge in oil prices has not resulted in government yields rising, suggesting that investors are more worried about softening economic fundamentals rather than inflation.

02-JAN-08   Europe
Investors are becoming increasingly nervous on the outlook for the U.S. economy; resulting in falling yields on government bonds issued by European countries. Yields will fall further on safe haven assets this year as the euro zone economy slows down and the ECB cut interest rates.

31-DEC-07   Europe
Short-term money market rates have continued to ease thanks to the concerted intervention by major central banks. The fall in short-term rates is good news for the banking sector and should help to support lending activity. If short term lending rates continue to ease, this will give a boost to equities which have performed dismally over the last four months.

28-DEC-07   Europe
Investors sold out of risky assets such as equities and brought safe haven assets on weaker U.S. new home sales. The deteriorating outlook for the U.S. economy resulted in the strengthening of U.S. as well as European government bonds.

27-DEC-07   Europe
Investor confidence continued to buoy as European bourses gained this week, whilst a shift away from government bonds reflects investor unease of inflationary pressures across the euro zone. Yields rose whilst prices fell as a result on longer dated government bonds.

24-DEC-07   Europe
Investor confidence seems to have regained as European bourses rallied today, whilst a shift away from government bonds reflects their continued unease of inflationary pressures across the euro zone. This resulted in yields rising whilst prices falling on long dated government bonds.

21-DEC-07   Europe
Renewed sentiment boosted European equities today. This resulted in investors moving out of safe haven assets such as government bonds, leading to rising yields and falling prices.

21-DEC-07   Europe
Renewed sentiment boosted European equities today. This resulted in investors moving out of safe haven assets such as government bonds, leading to rising yields and falling prices.

20-DEC-07   Europe
Expectations have risen that the BoE has more rate cuts in store as it seeks to stave off softer economic growth, shore up softening housing markets and perhaps even increase financial market confidence by un-sticking some of the ongoing tightness in short-term money markets.

18-DEC-07   Europe
Liquidity offerings by the ECB and BoE had a mildly positive impact on short-term lending rates today. The loans are not intended to increase longer-term credit availablility, but instead to ease flows over the next few weeks, thus boosting confidence within the financial sector.

17-DEC-07   Europe
World equity markets took a battering today as investors reacted to rising inflation and recession fears. European fixed income strengthened as risk adverse investors sort safe havens such as government bonds, resulting in falling government bond yields.

14-DEC-07   Europe
Markets remain stubbornly fixated on the downside, with uncertainty placing continued upward pressure on Libor rates.

12-DEC-07   Europe
The increased size of European central banks' planned open market operations in December and January are meant to ease credit conditions through the holiday period. With interbank rates still elevated for fixings with more than a 1 month maturity, European banks and investors remain risk averse.

11-DEC-07   Europe
Credit conditions remain tight in the euro zone and in the U.K., with the 3-month Euribor and Libor rates increasing throughout the day. The high cost of borrowing has eroded sentiment amongst firms, and their soured outlook, according to the German ZEW, reinforces banks' incentive to raise lending rates.

10-DEC-07   Europe
Credit conditions will remain tight in the euro zone, with the European Central Bank prepared to hold its interest rate steady in response to expanding money supply and rising inflationary pressures, while banks remain on guard and reluctant to lend.

07-DEC-07   Europe
European bourses remained in positive territory by the end of the trading week, doing so on the back of the BoE’s cut and ECB’s slightly softer stance, both of which offered corporates some much needed reprieve.

06-DEC-07   Europe
European government bonds weakened on stronger economic releases. Investors also became unnerved on some policymakers' decision on the ECB monetary policy committee for a rate hike, as a result yields rose.

04-DEC-07   Europe
Libor came under continued pressure on Tuesday, rising a further 2 basis points to 4.86%, a seven year high. At 86 basis points higher than the ECB’s benchmark rate, borrowing in euro’s is becoming increasingly expensive and thus, increasingly prohibitive.

03-DEC-07   Europe
The BoE (along with the ECB and U.S. Fed) offered additional liquidity to the market last week. While this was an attempt at ensuring adequate funding is on hand over the Christmas break, the offering itself raised fears over liquidity constraints, sending bank rates sharply higher.

30-NOV-07   Europe
Investors continue to sell out of European government bonds on expectation of a Fed rate cut, boosting equities. This resulted in rising bond yields.

29-NOV-07   Europe
Investors moved out of safe haven assets such as European government bond and into equities on expectations that the Fed will likely cut rates soon. As a result, bond yields fell and prices rose.

28-NOV-07   Europe
European bonds weakened today on stronger than expected euro zone economic data leading to rising inflationary expectations. As a result, investors sold out of bonds and yields rose.

27-NOV-07   Europe
European government bonds weakened today on higher than expected German CPI numbers. As a result, investors moved out of bonds on higher inflationary fears.

26-NOV-07   Europe
Investors shunned riskier assets such as equities as bail outs relating to the sub prime continue in the banking sector, this resulted in the strengthening of government bonds. As a result, yields fell.

23-NOV-07   Europe
Early next week markets will look out for the German Ifo and inflation report, which may give clues regarding economic growth in the euro zone and indeed, the ECB's next decision for monetary policy.

22-NOV-07   Europe
Risk adverse investors continue to move out of riskier assets such as equities due to increasing uncertainties surrounding possible losses from the sub prime. They chose instead to invest in safe haven assets such as European government bonds resulting in rising bond prices.

21-NOV-07   Europe
The BoE voted 7-2 to hold its main interest rate in November, from 8-1 in October. The extra vote came from the financial markets member, John Gieve, and may signal tough times ahead for financial markets. With future economic growth thrown into question, gilts continued to rally.

20-NOV-07   Europe
European banks continue to battle the credit crunch, as write-downs of debt aggravate interbank lending rates. This was particularly pronounced in the U.K., and helped raise the 2-year gilt. Inflation remains a key concern in the euro zone area, putting pressure on euro zone bonds; yields on euro zone bonds increased only slightly, as investors remain averse to equity markets and prone to fixed income.

19-NOV-07   Europe
Softness in the U.K. housing market is spurring sellers to agree to lower prices. Following a year of strong house price growth and mortgage borrowing, homeowners are increasingly pressured by higher interest rates and limited wage growth.

16-NOV-07   Europe
Although euro zone growth prospects remain relatively upbeat, softening business expectations and still weak investor sentiment are weighing heavily on markets' collective mind.

15-NOV-07   Europe
European government bonds strengthened on global equity weakness as investors pulled out of riskier assets and into safe haven ones.

14-NOV-07   Europe
Gilts reversed earlier losses as the Bank of England's quarterly inflation report suggested that a quarter point hike may well be on offer come 2008.

13-NOV-07   Europe
U.K. interest rate futures fell for a second day on Tuesday as strong inflation data dampened expectations of a near-term cut in interest rates from the Bank of England.

12-NOV-07   Europe
Expectations that lower earnings from European corporates are adding to views that the global expansion will slow at a faster than expected pace, limiting the ECB’s willingness or ability to hike rates.

09-NOV-07   Europe
Yields on European government bonds continued to fall on softer euro zone economic releases, resulting in rising bond prices.

08-NOV-07   Europe
European government bond yields fell on announcements by both the EcB and BoE to keep rates unchanged today and on softer U.K. house prices. Bond prices strenghtened as a result.

07-NOV-07   Europe
On trend, sterling has risen in dollar terms all year, supported by increased BoE interest rates and strong economic growth.

07-NOV-07   Europe
Bonds strengthened today, as investors turned from the equity markets. Inflation pressures are mixed with upside pressures stemming from higher oil prices and downside pressures from currency appreciation; the ECB and the BoE will hold fire. Further guidance will come from the ECB's post-match speech and Q&A session.

05-NOV-07   Europe
Weakening U.K. economic releases eased inflationary expectations today, resulting in falling yields and rising gilt prices.

02-NOV-07   Europe
A decline in the euro zone's manufacturing PMI followed a similarly weak report for the U.K.; the ECB and BoE will hold their interest rate targets steady through the remainder of the year as slower growth eases inflationary pressures.

02-NOV-07   Europe
The slide in equities and throughout financial markets has warmed investors to fixed income, allowing yields to fall the board. The decline in the euro zone's manufacturing PMI followed a similar report for the U.K.; central banks will hold their interest rate targets steady as slower growth eases inflation pressures.

01-NOV-07   Europe
Gilts recovered following yesterday’s sell-off on falling U.K. manufacturing PMI. This eased inflationary pressures and resulted in yields falling.

31-OCT-07   Europe
European government bonds continue to weaken on strong euro zone economic releases, causing rise inflationary expectations, as a result bond yields moved up.

30-OCT-07   Europe
Investors continue to sell government bonds today following a series of strong economic data releases including German employment numbers, which fuelled inflationary expectations.

29-OCT-07   Europe
The yield on a 10-year bund rose on elevated euro zone consumer prices in early morning trade. Though, during afternoon trading the bund recovered some of its losing ground driven by expectation of a Fed rate cut, prompting a mass buying of government bonds across the board.

26-OCT-07   Europe
Investors bought on weakening consumer sentiment and slight easing of euro zone money growth; European government bonds strengthened as a result.

25-OCT-07   Europe
Yields on European government bonds rose on rising inflationary risks in the euro zone. Investors responded by selling out of bonds.

24-OCT-07   Europe
Our Q3 special comment report "Western European Credit Quality Declines Amid Credit Market Turmoil" is out now.

23-OCT-07   Europe
Interest rate futures suggested traders have upped the ante in terms of expectations for a Fed cut at the end of this month, boosting the FTSE 100 and adding fresh wind to sterling’s sails.

19-OCT-07   Europe
The euro and the pound should maintain at elevated levels against the dollar, as inflation pressures in both areas are still present.

18-OCT-07   Europe
European government bonds strengthened on Thursday, extending yesterday's trend on the back of euro zone construction report which suggested activity in the sector has peaked.

17-OCT-07   Europe
Euro zone government bonds strengthened on softer house price growth leading to investors reducing their inflationary expectations and falling yields.

16-OCT-07   Europe
European government bonds weakened as a strong rise in euro zone consumer prices stoked investors' fears, leading them to selling out of bonds.

15-OCT-07   Europe
UK gilts weakened today on U.K. house price release which has continued to strengthen despite rising borrowing costs resulting from high money market rates.

12-OCT-07   Europe
European government bonds weakened on Friday due to stronger inflationary expectations in the euro zone and the subsequent reversal of investors positions.

11-OCT-07   Europe
European consumer prices released today have shown price pressures remain a concern, resulting in the weakening government bonds.

10-OCT-07   Europe
The governor of BoE signalled his reluctance today to cut rates in order to bail out financial institutions who take excess risk, yields on U.K. gilts rose as a result, leading to losses for investors.

09-OCT-07   Europe
The U.K. pre-budget report released today signals lower expected growth for next year. U.K. gilts rose as a result and yields fell, reflecting a dampening of inflationary expectations.

08-OCT-07   Europe
Expectations for slower growth in the U.K. and the notion that this will underpin the justification for a cut in U.K. interest rates saw the pound lower against the dollar today.

04-OCT-07   Europe
Increased transparency as opposed to rate cuts and additional liquidity offerings will prove the ultimate solution to the prevailing credit mess.

04-OCT-07   Europe
Increased transparency as opposed to rate cuts and additional liquidity offerings will prove the ultimate solution to the prevailing credit crunch.

02-OCT-07   Europe
While the long term trend in the EURUSD cross remains on an upward drift, this Thursday’s ECB interest rate announcement is expected to prove an obstacle to further near term gains for the pair.

01-OCT-07   Europe
Easing U.K. PMI suggests a slowing economy. This will help to reduce inflationary expectations resulting in rising bond prices.

28-SEP-07   Europe
European government bonds continued to strengthen on weakened euro zone economic releases. Gloomier business and consumer confidence and falling producer prices have reduced inflationary expectations resulting in falling yields.

27-SEP-07   Europe
Rebound in the European fixed income and equity markets reflect rising investor confidence and that we may have seen the worse of the credit market turmoil. This will be good news for corporate bonds.

26-SEP-07   Europe
Sterling money market rates continued to fall since hitting a peak in mid September, a reflection that much needed liquidity is returning to the short term financial markets. This will help to ease the pressure off corporate bond spreads.

25-SEP-07   Europe
The yield differential between a two-year and ten-year bund have widened lately reflecting rising inflationary fears.

24-SEP-07   Europe
European government bond yields continue to increase on expectations that ECB interest rates have peaked, giving fears that inflation may rise.

21-SEP-07   Europe
With softer inflation data for August released this week butting heads with stronger than expected retail sales growth for the same month, it is too early to make a call as to whether the BoE will opt to follow the Fed’s lead and cut rates any time soon.

20-SEP-07   Europe
Sterling has declined more than 3.0% vis-à-vis the euro this month on the back of confusion and uncertainty in the U.K. surrounding the credit turmoil and indeed how the Bank of England would react.

19-SEP-07   Europe
Just last week the governor of the BoE, Mervyn King suggested that widening the collateral accepted by the bank or offering money for “longer periods” would risk “moral hazard”. The events of the past week and heightened tension over the Northern Rock episode in the past days have clearly changed the state of play.

18-SEP-07   Europe
An "extraordinary" offering of funds by the BoE combined with a U.K. government guarantee to Northern Rock investors restored a measure of calm to U.K. markets today.

17-SEP-07   Europe
U.K. lender Northern Rock grew quickly based on its non-traditional business model of funding mortgages by borrowing in commercial-paper markets which are now essentially closed.

14-SEP-07   Europe
The Northern Rock bailout by the Bank of England this morning rocked financial markets. Government bonds advanced as the news increased demand for government debt.

12-SEP-07   Europe
European government bonds underperformed today. This reverses all the gains made yesterday as investors reduced their exposure to safe haven assets on expectations of a rate cut by the FED next week.

11-SEP-07   Europe
European government bonds underperformed today as investors sold out of bonds on Trichet's hawkish speech to the European parliament. This raises the certainty of another rate hike by the ECB before the year end.

10-SEP-07   Europe
European government bonds outperformed today as investors sought safe haven assets due to rising uncertainty over the U.S. economy and its possible impact on the euro zone.

07-SEP-07   Europe
Risk aversion remains heightened due to ongoing financial market turmoil and weak U.S. data resulted in widespread buying of European government bonds today.

06-SEP-07   Europe
The ECB may have opted to hold its refi rate steady at 4.0% today though Trichet's hawkish statement keeps the possibility of a hike to 4.25% very much on the table.

05-SEP-07   Europe
Financial markets will focus on today's monetary policy meetings by the BoE and EcB. Our expectations are for interest rates to remain unchanged for U.K. and the euro zone. This should give some support to bond prices which have taken a battering since late June.

05-SEP-07   Europe
Financial markets will focus on today's monetary policy meetings by the BoE and ECB. Our expectations are for interest rates to remain unchanged for U.K. and the euro zone. This should give some support to bond prices which have taken a battering since late June.

04-SEP-07   Europe
Short term money market rates remain at a historical high, a reflection of continued risk aversion. This increases the chance of temporary seizing up of liquidity, giving rise to a credit crunch as sellers of risky assets are unable to obtain short term borrowing.

03-SEP-07   Europe
The revival of M&A activities and strong sector performance have boosted European equities resulting in investors selling out of less risky assets such as government bonds and buying higher yielding assets such as equities, resulting in declining bond prices.

31-AUG-07   Europe
The unwinding of the carry trade means higher yielding currencies such as the euro and sterling continue to weaken against lower yielding currencies such as the yen and swissie.

30-AUG-07   Europe
U.K. lending and house price data released this morning revealed more mortgages than expected were approved in July, supporting the view that the housing market may not cool for some time yet.

29-AUG-07   Europe
Credit jitters will almost certainly continue to place pressure on the pound as markets remain uncertain over exactly what impact the sub-prime fall out will eventually have.

28-AUG-07   Europe
Softening tone by Trichet on ECB monetary policy reduces the certainty of an eminent hike widely expected next month. This will provide some support to the weakening corporate bond markets resulting from the sub prime fallout.

24-AUG-07   Europe
Investors continued to turn back towards European assets on Friday, boosting equity markets and lifting the euro and the pound.

23-AUG-07   Europe
Given the health of the U.K. economy, its general resilience to previous interest rate hikes, and the reinstatement of investors' positive sentiment, the BoE is likely to hold steady at its next meeting, though signal a hawkish tone in the subsequent minutes.

22-AUG-07   Europe
Restored confidence as reflected by rising European bourses resulted in investors moving away from safe haven assets such as government bonds today.

21-AUG-07   Europe
European government bonds continue to strengthen today on increasing investor risk aversion resulting from the sub prime fallout.

20-AUG-07   Europe
Another European bank bailout resulted in risk averse investors to move into safe haven assets such as government bonds causing bonds to perform strongly.

17-AUG-07   Europe
Fed rate cut today results in equities to recover. However, increased risk aversion has meant continued unwinding of excesses resulting in widening of bond spreads.

16-AUG-07   Europe
Rising concerns over further sub prime fallout has led to another day of huge equities sell off, whilst safe haven assets such as government bonds gain.

15-AUG-07   Europe
Jitter in the sub-prime market has led to continued buying of safe haven assets such as European government bonds by investors.

14-AUG-07   Europe
Easing U.K. inflationary pressures as indicated by the CPI data released today suggests an expected interest rate hike to 6.0% may be delayed.

13-AUG-07   Europe
UK PPI figures have proven mildly less inflationary than the Bank of England has thought, easing the pressure for a near-term interest rate hike.

10-AUG-07   Europe
The sheer fact that the ECB has been forced to provide short term liquidity has intensified nervousness surrounding the U.S. sub-prime fall-out.

09-AUG-07   Europe
The ECB's increase in the overnight rate signals that banks are reducing the supply of money as losses (and concerns about bigger ones to come) triggered by the U.S. mortgage slump spread to Europe.

08-AUG-07   Europe
The Bank of England's August Inflation Report gave no suggestion that it will definitely rise to (or indeed, above) 6%, but rather made noises that a hike could come in early 2008, rather than the end of 2007.

06-AUG-07   Europe
Fear surrounding U.S. mortgage markets continues to batter European and Asian equities. It is worth keeping in mind, however, that the outlook for U.S. economic growth remains firm.

02-AUG-07   Europe
European bourses continue to improve as company earnings prove a correction, as opposed to a major credit crunch, is under way.

01-AUG-07   Europe
Although no changes to interest rates are expected to be made on either side of the channel in August, post meeting verbiage from the ECB should give clues as to the timing of that bank's next move.

31-JUL-07   Europe
Investors took profits on European government debt today as upbeat earnings news and easing credit fears boosted regional equity markets. Gilt futures extended the prior day’s losses.

27-JUL-07   Europe
European bourses head for their biggest week of losses since March on Friday as fears over financing conditions within credit markets dampen expectations for continued M&A activity.

26-JUL-07   Europe
Equity market jitters continue to send investors toward safe-have government debt.

25-JUL-07   Europe
Gilts rose to near seven week highs as weak U.S. home sales data kept demand for safe-haven government debt very much alive.

24-JUL-07   Europe
Sub-prime woes continue to drive investors toward safe-haven European government bonds.

20-JUL-07   Europe
The MPC is likely to remain neutral for at least several months, taking its time in assessing the reaction of the domestic economy as it adjusts to the latest rate hike.

18-JUL-07   Europe
U.K. gilts rose after minutes of the Bank of England's last rate setting meeting showed a 6-3 split on hiking interest rates. The 10-year gilt rose 0.42 to 89.84, while the September short sterling futures contract rose 0.01 to 93.80.

17-JUL-07   Europe
Weighed down by a record £1.3 trillion pounds in debt, higher U.K. borrowing costs will deter spending by consumers, resulting in slower economic growth.

12-JUL-07   Europe
Read our European Credit Trends Special Comment for Q2 "spec grade shines but M&A and wider spreads threaten a tumble", published yesterday.

10-JUL-07   Europe
The euro has hit a new record high against the dollar, which will grieve some politicians, but it is mostly market volatility.

09-JUL-07   Europe
The recovery in petrol prices will aggravate pricing conditions in the U.K., though so far producers have struggled to pass-through higher input costs.

05-JUL-07   Europe
Monetary policy continues to tighten in Europe, but policymakers are getting hedgy suggesting the peak is not far off.

03-JUL-07   Europe
The failure of European firms to hike output costs, alongside the upswing in wage inflation, could have deletrious effects on fixed investment.

29-JUN-07   Europe
All the dominoes are lining up for very slow private spending growth in the U.K. next year.

27-JUN-07   Europe
Ongoing concerns over just how far subprime mortgage problems could hurt the broader U.S. economy continued to pressure debt, sending gilts, Bunds and Treasuries higher in early trade.

26-JUN-07   Europe
The relative strength of Europe's currencies is doing some of the monetary authorities' work for them.

25-JUN-07   Europe
There is mounting evidence that the half-decade retreat in German real wages is over.

21-JUN-07   Europe
Although British interest rate futures pared losses and gilt returned to positive territory in late trade, tracking a global move higher, the prospect of rising interest rates is weighing on the outlook.

20-JUN-07   Europe
Bunds fell in line with gilts and Treasuries mid-week, all tracking lower on the market's increasingly bearish bias given renewed concerns about rising global interest rates.

18-JUN-07   Europe
A further rise in yield for the 10-Year Treasury and German Bund, on the back of a continued selloff in debt markets, could see European indicies continue to trend downward in the coming days.

15-JUN-07   Europe
European bonds declined throughout the week as reports showed German business confidence at the highest since the country's reunification in 1990 and euro-region inflation near the ECB's 2.0% threshold, fuelling expectations of rising borrowing costs.

14-JUN-07   Europe
The yield in European bonds continues to rise unabated resulting from a re-assessment of stronger economic growth and higher interest rates.

11-JUN-07   Europe
Upswing in U.K. factory gate inflation so far fails to reflect the increase in pricing pressure feared by the central bank.

08-JUN-07   Europe
Tight spreads on Euro-denominated corporate bonds despite ECB rate hike suggest investors remain confident on the prospects for euro zone firms.

07-JUN-07   Europe
The most significant for sterling and gilts today will be the BoE monetary policy meeting.

01-JUN-07   Europe
European producers are exercising a greater degree of pricing power, which will keep central banks on their toes.

31-MAY-07   Europe
British households are confident, but in order to remain so they apparently intend to minimize spending and increase savings.

30-MAY-07   Europe
Sterling's negative sentiment was compounded by a comment from the BoE’s über-dove, David Blanchflower, who hinted that another rate hike in the U.K. is not a certainty.

29-MAY-07   Europe
ECB Governing Council member Axel Weber's suggestion that interest rates could be lifted into “restrictive” territory in order to control inflation will continue to place pressure on euro debt markets throughout the coming days.

23-MAY-07   Europe
If the BoE had wanted a near-term rise to 5.75%, they would have opted for a half-point hike in May.

22-MAY-07   Europe
Further ECB rate hikes will fail to dampen German corporate optimism.

21-MAY-07   Europe
Dip in house price data in the U.K. is supply driven and not yet the inflection point in the housing boom.

16-MAY-07   Europe
As the BoE says, the degree of uncertainty is higher than normal, but the short-termism of their commentary is aggravating this ambiguity.

16-MAY-07   United States
Mortgage applications for the purchase of a home have been firming in a manner which suggests that the demand for housing has fared relatively amid the uncertainties stemming from the subprime mortgage crisis.

15-MAY-07   Europe
It appears at the moment that the BoE has no reason to revise its forecasts in tomorrow's Inflation Report.

10-MAY-07   Europe
Credit conditions in Europe will continue to tighten into the second half of the year; broadly speaking, above-expectations growth should offset the impact of higher rates for most firms.

09-MAY-07   Europe
Unlike the BoE, the U.S. Fed is expected to hold pat at the conclusion of its policy setting meeting for May, suggesting sterling will enjoy a 25 basis point yield advantage, at least, over the U.S. dollar.

04-MAY-07   Europe
The German wage settlement is not unduly inflationary and presents a concrete hint of self-sustaining growth in the euro zone.

03-MAY-07   Europe
European bond yields edged higher on the brightening economic outlook, as global interest rate expectations surged, supported not just by the day's firmer U.S. data flow, but also by the falling euro zone unemployment rate and rising equities.

03-MAY-07   Europe
In Europe, private equity activity is likely to continue to have a small but negative influence on the credit cycle over the medium term.

03-MAY-07   Europe
In Europea, private equity activity is likely to continue to have a small but negative influence on the credit cycle.

30-APR-07   Europe
European bond yields slipped as the technicals implied that recent increases had perhaps been a little overdone.

30-APR-07   Europe
Continued upward momentum in euro zone M3 growth adds additional momentum to the case for further tightening.

27-APR-07   Europe
Technicals drove the U.S. dollar higher vis-a-vis the euro on Thursday, leaving fundamentals to completely erase those gains on Friday.

25-APR-07   Europe
The slowdown in growth rates in the more dynamic services sectors signal that growth in the U.K. has passed its peak.

23-APR-07   Europe
Higher inflation on the back of stronger German wages, combined with the decrease of corporate profitability, could widen low yield spreads and spell the end to hopes for a shift toward self sustaining growth.

20-APR-07   Europe
The fact that the manufacturing sector of the euro zone's third-largest economy continues to struggle against recession is sign that the region is not firing on all cylinders.

17-APR-07   Europe
Blowout in U.K. CPI inflation will not immediately lead to more rate hikes. This was expected and it is the pace of activity growth heading into Q2 which matters.

16-APR-07   Europe
A Bank of England rate hike will have little impact on imported raw materials prices, but it will diminish demand for such products, keeping local pricing pressures at bay.

11-APR-07   Europe
The ECB will use tomorrow's press conference to signal whether the re-adopted one hike/three months schedule (implying a rise in June) will be preserved.

10-APR-07   Europe
Germany has not yet entered a period of self-sustaining growth, but continued improvements in employment conditions will help add to private household demand.

06-APR-07   United States
Persistently strong employment will help the economy weather its areas of weakness while also reviving inflation fears.

05-APR-07   United States
One clear advantage the current US economy has over the soft landing of 1995-1996 is a milder trend in jobless claims and unemployment.

03-APR-07   Europe
Rising core industrial prices in the euro zone will ultimately impair fixed investment and business sales growth.

29-MAR-07   United States
Homebuyer mortgage applications show that the demand for housing during the early stages of housing’s peak spring selling season was up from a year earlier.

28-MAR-07   United States
The rising trend of debt and lease payment relative to disposable personal income very much limits consumer spending's upside potential.

27-MAR-07   United States
Only if home price deflation were to become a recurring phenomenon might it constitute a major recession risk.

27-MAR-07   Europe
A self-sustaining expansion in Germany would mean a sustained, above-trend euro zone expansion, which in turn could wrest further hikes out of the ECB.

26-MAR-07   United States
Despite all of the worry stemming from the contraction of the supply of subprime mortgage credit, 34 new "junk" bonds were issued in the US market raising $16.9 billion of funds through the first 23 days of March.

23-MAR-07   United States
… if the Fed is more determined to ward off a deep slide by equity prices, then Treasury bondholders are less likely to benefit from a “flight to quality”.

23-MAR-07   Europe
Going forward, the euro currency should hold onto its appreciated value vis-a-vis the U.S. dollar. This should lower the value of imports, particularly of energy, and also continue to improve portfolio investment.

21-MAR-07   United States
… home price deflation might yet wield more influence over monetary policy than core PCE price index inflation.

19-MAR-07   United States
The relative steadiness of corporate credit risk premia may help to stabilize, if not firm, equity prices.

16-MAR-07   United States
Protracted home price deflation would eventually boost the delinquency rates of prime mortgages to unexpectedly high levels and, thereby, lead to a broader contraction of the supply of credit.

15-MAR-07   United States
… the relatively modest widening of corporate credit risk premia suggests that a broad-based contraction of liquidity has yet to occur.

14-MAR-07   United States
The resilience of consumer confidence may follow from the narrowness of an otherwise intense surge in subprime mortgage repayment problems.

13-MAR-07   United States
Relatively thin high-yield spreads tend to encourage a healthy supply of business credit from banks.

12-MAR-07   United States
Expectations of substantially slower growth for mergers, acquisitions, net stock buybacks, and special dividends support the likelihood of a milder climb by nonfinancial-corporate debt.

09-MAR-07   United States
Surveys of consumer confidence offer no indication that lower home prices are significantly diminishing the spending proclivities of US consumers.

08-MAR-07   United States
A reduction in the available supply of subprime mortgage credit implies fewer home sales and lower home prices than otherwise, but it precludes neither the growth of home sales nor a stabilization of home prices.

06-MAR-07   United States
… declining share prices imply that US home sales and residential real estate prices will be lower than otherwise.

05-MAR-07   Europe
A steady downswing in U.K. services’ new business inflows points to further expansion, but at a slower rate in the months ahead.

02-MAR-07   United States
This economy will not supply extraordinary support to mediocre businesses, but neither will it stress otherwise solid entities.

01-MAR-07   Europe
: European equity markets fell further in volatile Thursday trading, as the initial morning Bernanke-boost was quickly eradicated thanks to a combination of the re-surfacing U.S. inflationary threat and extended Asian stock market losses.

28-FEB-07   United States
Any slump by business investment spending may not be long lasting according to recent regional surveys of planned capital spending

27-FEB-07   United States
…surpassing the weakness in housing and manufacturing are strong rates of consumer and business spending, and favorable interest rate and inflation outlooks -- this belies the likelihood of an imminent slump of the US economy.

26-FEB-07   United States
… the greatest level of credit risk is concentrated in the firms that are takeover targets, merger seekers, or friendly to share buybacks.

23-FEB-07   United States
… the more potential homebuyers hear of repayment problems with subprime mortgages, the more likely they are to postpone a planned purchase of a home in order to better ascertain the firmness of residential real estate prices

22-FEB-07   United States
Once the median growth of profits trailed NFC debt growth by -0.7 points in 1998, a protracted credit cycle slump had arrived.

21-FEB-07   United States
… regardless of the housing cycle, homebuyer mortgage applications almost always decline sequentially in February …

20-FEB-07   United States
The breadth of the equity market’s current gains is a positive for the credit cycle.

16-FEB-07   United States
… the under-pricing of credit risk appears to be greatest at the Caa rating category.

14-FEB-07   United States
In contrast to the conventional wisdom, Bernanke stated that corporate leverage was still near historical lows.

13-FEB-07   United States
Not many employers have complained about a pressing need to either hike wages significantly or else risk a massive defection of valued employees.

12-FEB-07   United States
As inferred from the yearly growth of the US government’s corporate income tax receipts, profitability has slowed significantly, but not to a subpar pace.

09-FEB-07   United States
… the upside for interest rates remains bounded by widely held expectations of significantly slower nominal GDP growth for 2007.

08-FEB-07   United States
Problems with subprime mortgage loans imply that the US economy can ill afford either significantly higher interest rates or protracted labor market softening.

06-FEB-07   United States
Granted that the sustainability of the recent strength of most aggregate measures of nonfinancial-corporate credit worth is doubtful, that does not imply that a peaking of these ratios will quickly send the corporate credit cycle into a downward spiral.

05-FEB-07   United States
Notwithstanding the recent jump in the number of credit rating downgrades of US high-yield companies … the median expected default frequency (EDF) of the US’ non-investment-grade corporations set a new record low during the first two days of February

02-FEB-07   Europe
There are signs of a slowdown in European M&A activity, as the number and value of M&A transactions have declined. This may indicate the outlook for events-driven rating changes will slow.

01-FEB-07   United States
Predicting a severe economic downturn has become as risk-laden as predicting a pronounced acceleration of price inflation.

30-JAN-07   United States
The job opportunity index still falls considerably short of where it resided when labor market tightness last compelled the Fed to implement a restrictive monetary policy in 1999-2000.

29-JAN-07   United States
… the bulk of the impetus for the lack of defaults has been the rising mountain of profits

26-JAN-07   United States
To the degree that the latest run-up by mortgage yields trims mortgage applications from potential homebuyers, renewed concern regarding the adequacy of US economic growth probably will push Treasury bond yields down from recent highs.

25-JAN-07   United States
Although shorter and milder recessions do not assure lower bond default rates, they may diminish uncertainties regarding the extent of defaults and allow financial markets to better absorb defaults.

24-JAN-07   United States
The latest thinning of already narrow high-yield spreads bodes will for equity price performance.

23-JAN-07   United States
Milder and shorter recessions imply that investors will accept lower compensation for systemic risk.

22-JAN-07   United States
Given December’s score of +0.04, it’s conceivable that the moving 6-month average of the NAI has already troughed at the -0.19 of 2006’s second half, which would lessen the need for a rate cut later in 2007.

19-JAN-07   United States
Despite very adverse developments on the housing front, the University of Michigan’s index of consumer sentiment for early January surpassed its average of 2005’s first half, or when housing was nothing less than robust, by a significant +6.4%.

18-JAN-07   United States
December’s +2.6% annual rate of core CPI inflation was above the Fed’s comfort zone, which reinforces our view that only a material softening of the labor market might prompt an easing of monetary policy.

16-JAN-07   United States
A comparatively low real federal funds rate helps to explain the abundance of financial liquidity and the extraordinary thinness of high-yield credit risk premia.

11-JAN-07   United States
Because of how initial state unemployment claims serve as a leading indicator, December’s unemployment rate of 4.5% is more likely to move lower, rather than higher, during the next 6 to 12 months.

10-JAN-07   United States
Persistently thin high yield credit risk premia would favor higher valuations for common stock.

21-DEC-06   United States
Shareholder compensation as a percent of pretax profits shows a much higher correlation coefficient of +0.71 with the Baa industrial company bond yield spread than with the high-yield spread’s coefficient of +0.50.

14-DEC-06   United States
Both December 8th’s jump by mortgage applications and November’s better than expected showing by retail sales trimmed the risks of a hard landing and lessened the need for a lower fed funds rate.

13-DEC-06   United States
The durability of the latest thinning of high-yield bond spreads is brought into question by a decline in upgrades’ share of the number of US high-yield company credit rating revisions from the 49% of the year-ended Q3 2006 to the 36% of the fourth-quarter-to-date

12-DEC-06   United States
On balance, today's corporate finances seem better able to shoulder the latest wave of stock buybacks compared to the previous major buyback surges of 1999, 1989 and 1986

24-JUL-06   United States
Retail sales show stronger correlations of the expected sign with various aggregate measures of profitability than nominal consumer spending does.

21-JUL-06   United States
Retail sales show stronger correlations of the expected sign with various aggregate measures of profitability than nominal consumer spending does.