G7 government bonds overvalued

The global economy has had a bright start to 2005. US consumer spending rose over the holiday period, business surveys in the G7 are upbeat and Chinese activity appears to have re-accelerated. Near-term prospects have benefited from the US election result, lower long-term interest rates and the price of oil falling from its autumn peak. A key issue for investors is the sustainability of this upswing. It is likely that newsflow will remain solid until the spring but there could then be a renewed slowdown. The monetary and fiscal policy backdrop is becoming less expansionary and US househol...