Business

Whether front-running or fear-based (or both), the actions of BoJ's Kuroda last week have driven global bond yields into freefall with JPM's global index at 9-month lows and BofA's at 12-month lows. Overnight saw short-end JGBs push below the BoJ's -10bps threshold and 10Y rates push towards NIRP to record lows. German bonds extending their epic voyage into fantasy and hit new record lows across the curve with 5Y at -32bps.

Bond yields across the globe are collapsing...

When Draghi speaks (or releases his statement), the algos obey.. and sell EURUSD. No new news at all - just a repeat of the same statements that "QE is deemed effective' (by whom we ask), and a recalibration is in order (as the situation has changed since December). His biggest problem from what we can tell is the fact that the banking industry's collapse augurs very badly for industrial production and an economic recession across Europe.

The headlines from Draghi's prepared remarks...

Compared to the Wall Street Consensus, which had originally expected Q4 2015 GDP to rise as much as 3% only to admit Q4 was a total bust (and this time not even the weather was to blame) when last Friday the BEA's first estimate of Q4 growth revealed GDP had risen a minimal 0.7% - a number which will be reduced following today's big construction spending miss - the Atlanta Fed's 1.0% pre-announcement estimate seems like a bulls eye.

After having correctly called the January plunge, JPM's Croatian "duo of doom" of Kolanovic and Matejka predicted a modest bounce. This is what Matejka said in the middle of last month: Clearly, equities are unlikely to keep falling in a straight line, with periodic rebounds likely... However, we believe that one should be using any bounces as selling opportunities, adding that "one should not overstay one’s welcome in the bounce."

As we first noted last week, something absolutely astounding has happened.

Two weeks ago, the head of the Bank of Japan, Haruhiko Kuroda stated that Japan has a “potential growth rate of 0.5% or lower.”

By way of context, remember that the Bank of Japan has been at the forefront for ALL monetary policy for decades. The US Federal Reserve launched its first QE program in 2008. The European Central Bank launched its first QE program in 2015. The Bank of Japan first launched QE back in 2001.