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Strategies & Market Trends : The coming US dollar crisis
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To: Box-By-The-Riviera™ who wrote (153)6/12/2007 7:47:30 AM
From: stan_hughes  Read Replies (1) of 71406
 
From the June 10th Markit Credit Wrap -- note the sarcasm at the very end --

"A scare in the US bond market led to a correction in global credit last week. Spreads had reached record tight levels on Tuesday, with the iTraxx Europe 7 index briefly dipping below 20bp. However, strong US economic figures and a consequent realisation that the Federal Reserve is not going to cut interest rates led to US Treasuries retreating and 10-year yields rising above the crucial 5% mark. This makes credit and stocks relatively less attractive, as well as indicating higher inflation in the months ahead. Rates have been rising in disparate parts of the world - the ECB and the New Zealand Central Bank both tightened monetary policy recently, with Japan and the UK expected to follow suit in the months ahead. Credit spreads and stocks have been supported by the lax liquidity environment and more restrictive conditions could signal tough times ahead.

A series of reports later this week should provide clues on the probability of this gloomy scenario. Consumer and producer prices data, due for release on Thursday and Friday respectively, will be even more crucial than usual. Higher than expected figures on either set of numbers will add to inflation concerns and could push Treasury yields beyond 5.25%. Predicting the turn in the credit cycle has proved a fruitless task over the last year, with bears hopes of a housing induced downturn seemingly scuppered. In the form of a global liquidity withdrawal, they might think they have finally found their saviour"
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