14:41 ET 10-year: -03/32..4.491%....GNMAs: +01/32....$-¥: 114.8650....Euro-$: 1.2039
The G20 Needs to Act: This weekend's G20 meeting concluded with release of a communique that stated, among other things, that "risks - long lasting high and volatile oil prices, widening global imbalances and rising protectionist sentiments - are to the downside and could exacerbate uncertainties and aggravate global economic and financial vulnerabilities." Evidently the group realizes the current challenges to the global economy and as the latest IMF World Economic Outlook points out global imbalances cannot be corrected without a significant decline in oil prices.
Michael Woolfolk of BONY adds, "it is apparent that the G20 has been made aware of this problem and is attempting to coordinate fiscal and monetary policy to remedy it." Though he adds, "sure...it's believable," if they ever follow-through...a case of a little less conversation and a little more action.
"If the G20 is able to coordinate a global monetary tightening sufficient to prompt a significant decline in oil prices, perhaps below $40/bbl, a soft landing scenario by 2007 looks increasingly likely. If, however, the G20 makes as little progress this next year on policy goals as it has in the past year, a hard landing may be closer at hand than many now realize."
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and the ECB is talking about an inverted yield curve.....
The ECB is saying that an inverted yield curve "has started to feature as a plausible risk scenario," as short-rates may be increased as growth expectations are lowered. German 2-year notes tagged a 2.53% yield, the highest yield since Mar, amidst inflation talk from European officials (ECB president Trichet and economist Issing). (Bloomberg.com)
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