5 in 2010 would slow to 4 about this year

Assuming that the prospects of State bond yields are a good indicator of future economic growth, while emerging markets give already nervous investors worrying signs.

Many analysts in the United States swear by the analysis of yield curves; Indeed, fluctuations of the differences between short and long of American State bonds rates of return were able to predict six successfully seven recessions since 1969.

The temptation is to follow the same reasoning to other countries even if less liquid markets may alter the quality of prediction.

If emerging markets are a few concerns, analysts moderate them speaking instead of slowing the growth of impending recession.

In principle, the bond yield curve is oriented toward the top (it is pentifie), served in the short term interest rates are lower than those of the long term.

But for the emerging, this curve has tended to be flatten lately, or even to reverse, the long obligations while offering a premium become negative from the short titles.

Which means, usually, that investors are a poor opinion of the Economic Outlook in the long term, following a pattern of low growth and high inflation.

The Brazil and the India have a reverse curve and China is flat, with a differential between the two and the 10 years under 70 basis points, according to Thomson Reuters data. For the United States, the performance gap is 250 basis points.

"Flattening of the curve of the yields of emerging markets as a result growth expectations adjustment." "It is a slow growth environment that is integrated in the course," said Kieran Curtis (Aviva).

CURVE REVERSE RECESSION

This is the result of rate increases by the central banks of emerging countries. They are intended to combat inflation caused by the oil and food prices and ultra-low rate of the US policy. These measures work: they contain inflation but at the cost of a brake on growth.

The progression of the industry slowed everywhere in the world in may, while in China, the plants experienced their lowest growth in nine months rate. The four major economic powers emerging - India, China, Brazil, Russia - were part of a less growth in the first quarter.

An inverted yield curve tends to announce a recession. This was the case for the inversion found end of 2006 in the United States. Eighteen months later, they found themselves in a recession.

The correlation is less obvious for the rising economic powers, bond markets are less liquid, where public banks usually hold a significant share of the debt of the countries. Consumers also tend to be less sensitive to changes in interest rates.

However, the emerging markets representing three quarters of global economic growth and a slowdown in their hand, even modest, cannot be without consequences.

It is unbridled growth in China, and to a lesser extent in India, which is source of the recent explosion of the prices of raw materials. Their resistance also helped to cushion the impact of the financial crisis of 2008.

A flat yield curve is bode well for the stock market. It hinders the bank credit for example, where banks may not impose higher interest on their loans in the long term.

STEP GOOD FOR ACTIONS

It is not surprising that the Brazil and the India, which will further tighten the monetary screws, have exchanges among the worst performing in the world this year.

"The yield curve gives a very good overview of the degree of attractiveness of a market for the shares," says Michael Penn (Bank of America/Merrill Lynch). "Indian of the yield curve is flat and almost reversed;" "a negative yield curve, this is not good at all for actions".

The India is the market which worries the most analysts, especially in the light of the State of growth in the first quarter of the year, the lowest in five quarters.

Like most emerging countries, the monetary policy of the India was released too long; interest rates remained negative 31 months, according to Lombard Street Research, which predicted a "violent" return of crank by the end of the year last week.

Rashique Rahman (Morgan Stanley) explains that if a flat curve involves more a slowdown in inflation that growth in China or the Brazil, it is exactly the opposite in India.

Lombard Streeet anticipates 6.5 growth in India this year, while originally expected 9. Most analysts expect around 7.5.

For China, it is feared the worst a slowdown of around 8 to 9 annual growth. The Brazil, whose GDP rose by 7.5 in 2010, would slow to 4 about this year.

Figures are not those of a recession but as say BoA/Merrill analysts, which prepares it is perhaps "a slowdown in slow motion".

The Indian of the yield curve graph:

on the slowdown in growth: