Here’s a bit of proof of our assertion that the bond market is better at forecasting recessions than the Wall Street economists. Apparently in March 2001, the first month of the last US recession, 95% of US economists were predicting that there wouldn’t be one, and the average forecast growth rates for Q2 and Q3 were 2.2% and 2.3%. This New York Times article suggests that because recessions ar…Read the article
We’ve mentioned the crystal ball-like qualities of the US yield curve a couple of times on this blog. In May Jim showed that it can be a good predictor of recession (read article here), and the San Francisco Fed has recently published this interesting piece that adds weight to the argument.
There is some statistical analysis within the article, but in short it concludes that the yield curve is …Read the article
We have just 17 days to wait till the publication of Alan Greenspan’s autobiography, "The Age of Turbulence: Adventures in a New World". It’s 544 pages long, so hopefully nobody will buy it for me for Christmas, but from the synopsis that’s been released we learn what a great job he did of saving the world:
The most remarkable thing that happened to the world economy after 9/11 was …nothing. Wh…Read the article
It was announced yesterday that US house prices fell by 3.2% in the year to the end of June, according to the S&P/Case-Shiller house price index. As the chart to the left shows (click to enlarge), this is the most severe slide since the index began in 1988. It is worth emphasising that this data does not include the turbulence of the past couple of months – things may have deteriorated much fur…Read the article
However, the recent volatility and economic data have market participants ques…
Rather ironically, a Canadian investment company called Coventree has been ostracised by investors, and (almost) literally "sent to Coventry". Coventree Inc, which specialises in structured credit, saw its share price fall by 32% on Monday and by 72% yesterday after the recent credit crunch meant that it was unable to refinance C$700m (about £330m) of maturing debt. After failing to refinance t…Read the article
Following on from my comment on Friday, it’s interesting to note that the Bank of England has so far refused to pump liquidity (Ooh matron) into the UK money markets, and as a result, the UK overnight interest rate is currently 6.5% (click on chart to enlarge).
Mervyn King (who is one of the hawks in the MPC) last week said that credit turmoil might be a good thing if it persuaded investors to…Read the article