>We believe the next domino to fall in a multi-year process of
>adjustment in US capital inflows is fixed income assets. Foreigners,
>particularly out of Asia, are increasingly holding the key to both
>the USD and bond yields, ultimately leading to stronger Asian
>currencies. We estimate that part of the recent backup in bond
>yields is due to funding pressures, creating a natural "break" to US
>growth. A legacy of current account deficits means the US economy is
>increasingly dependent on the behaviour of foreign investors.