Higher rates offer relief to bond outlook

After a very poor year in 1999, the medium term outlook for bonds is improving as higher interest rates are reducing expectations of inflation. Even though in the US, growth is strong, there is no sign of inflation, yet the bond market remains nervous. Paul Thursby, manager of Global Bond Trust, commented that US budget is now in surplus, so issuance would be limited, which made the current nervousness all the more surprising. He said: "The market has worried that the Fed has reacted too slowly but it is clear now that a tightening policy is in place. The effects of the quarter point rise...