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Bonds and commodities revisited According to Alan Williamson, a commodity strategist with 20 years of experience who now works at Galena Asset Management Ltd, a London and Geneva-based commodity funds house, recent weeks have seen a succession of weaker-than-expected data out of the US, leading to sharp downwards revisions to market expectations of growth in the second half of the year and through 2011.

Last month’s disappointing non-farm payrolls data was followed by a poor advance estimate of GDP growth in the second quarter - GDP expanded at a quarter-on-quarter annualised rate of +2.4%, a figure which already looks likely to be revised lower due to a much weaker June US trade balance and negative inventory revisions.

Recent bond market rally The soft June personal income and expenditure data also raises questions about where the stimulus to growth will come from, especially given the already stretched policy framework – interest rates at effectively zero and a public sector deficit expected to be around 10% of GDP.

The softer economic outlook led to last week’s announcement by the Fed of an extension to its quantitative easing programme with the funds from the sale of its mortgage backed securities set to be re-invested in purchases of US Treasuries. The market reaction was swift, with the bond market rallying, pushing yields down to historically low levels. The yield on the US 2-year note has fallen to a record low of ju......................

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