Business

Year-to-date, BofAML's Baraby Martin notes that the market narrative has swung wildly. "US recession...", “global recession...", "China devaluation...", "commodity bust..." and "energy defaults..." have all been blamed as the major drivers of risk assets thus far in ‘16. The bearish concoction has left markets way down from their January levels. In credit, investment-grade spreads widened 16bp last month, and high-yield 36bp – the worst start to the year since 2008.

Dear Bank of Japan, how do you spell unintended consequences:

• PLANNED MARCH SALE OF 10-YEAR JAPANESE GOVERNMENT BONDS THROUGH BANKS TO BE CANCELED AMID EXPECTED BELOW-ZERO YIELDS - NIKKEI
• JAPAN'S MINISTRY OF FINANCE IS EXPECTED TO ANNOUNCE WEDNESDAY THE FIRST-EVER DECISION TO CALL OFF SALES OF 10-YEAR JGBS- NIKKEI

Here is the full Nikkei report on this absolute stunner of a development:

This was not supposed to happen. None other than The U.S. Federal Reserve Bank of Dallas, in a research paper released in January, said that

a drop in oil prices brought about by rising supply -- like the current one -- should boost global growth by up to 0.4 percentage points. “This is mainly due to an increase in spending by oil-importing countries, which exceeds the decline in expenditure by oil exporters,” the paper said.

Over the past year, and certainly in the aftermath of the BOJ's both perplexing and stunning announcement (as it revealed the central banks' level of sheer desperation), we have warned (most recently "Negative Rates In The U.S. Are Next: Here's Why In One Chart")  that next in line for negative rates is the Fed itself, whether Janet Yellen wants it or not. Today, courtesy of Wolf Richter, we find that this is precisely what is already in the small print of the Fed's future stress test scenarios, and specifically the "severely adverse scenario" where we read that:

As we wrote yesterday when reviewing the latest note from JPM's Mislav Matejka, according to the JPM strategist not only had the window to buy stocks into the torrid S&P500 rebound closed, but traders should "start fading it within days" as JPM stuck "to the overriding view that one should use any strength as an opportunity to reduce equity allocation."