The Last Bond Bull Market

Contributed by mm | August 8, 2006 2:38 AM PST

Bill Gross at PIMCO claimed that we have seen the peak of interest rates in this tightening cycle, and we are up against a slowing economy, if not recession.

We will find out if those at Fed are watching the same crystal ball. Answers will be out in 24 hours.

From PIMCO:

Why then should the Fed be stopping and the bond market have bottomed in early
July? The overarching reason is that 425 basis points of short-term hikes and the concomitant tightening of the yield curve in the past several years has been more than enough to slow economic growth and contain inflation. Thatâ€™s a bold statement to make in the face of an apparently still strong domestic economy, a booming global environment, and accelerating core CPI numbers, but PIMCOâ€™s cyclical analysis would suggest that it is justified. No doubt, Asian and Euroland growth is acting as a strong magnet for U.S. exports but the tightening cycle
in the U.S. seems to have run its course, primarily because of its effect on housing and related repercussions on consumer spending and economic activity.

This post has 2 comments. Read and share your opinions.

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Comments

>>> Rich Slick Commented on August 8, 2006

Bill Gross is WRONG, IMHO. The Fed may pause today but they will resume at their next meeting $77/barrel. Gold is still hovering at $640/oz and oil is at $77/barrel. These two items are HUGE factors in directing the fed towards decisions regarding the fed funds rate.

The Fed can't risk the loss of confidence of its paper products (i.e. Federal Reserve Notes a.k.a "cash") nor can it ignore the inflationary pressures caused by high energy prices (natural gas, oil, electricity, etc). My bet is on 6% Fed rate by end of 2006.

>>> MikeK. Commented on August 8, 2006

Something i learned in B-school.... almost every recession has been triggered by oil price spike... and if we fall into another recession here, it will be another one...

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