stimulus

While the Riksbank left its repo rate unchanged at -0.5%, as expected, in its decision this morning, far more interesting was the Riksbank's decision to formally end making new bond purchases, i.e., QE, after almost three years. However, in order to ensure a smooth transition, the Riksbank said the end of QE would take place in the most dovish way possible and the central bank would continue reinvesting maturing bonds and coupons, and also announced that it will bring forward some of the large 2019 redemptions, which it will reinvet in 2018.

Authored by Alberto Gallo via Algebris Investments,

“Your loving give me such a thrillBut your love don’t pay my billsNow give me moneyThat’s what I want”Money – Barrett Strong, 1959

Ten long years after the crisis, volatility and fear seem to have disappeared from financial markets. A synchronous global expansion coupled with persistently loose monetary policy has produced a goldilocks environment for all assets. Will it work for another year?

Authored by Sven Henrich via NorthmanTrader.com,

No period is worse for bears than when it’s the best time to sell stocks. It’s the polar opposite of when conditions are worst for bulls, right when it’s the best time to buy as it was in January-March 2009. The exhaustion factor is enormous. It’s called capitulation as moves get stretched to the extreme even though the set-up is valid.

While many have repeatedly warned over the past year that the record gains in credit are simply too good to stay - especially in Europe where yields and spreads have collapsed largely thanks to the ECB's relentless purchases of corporate debt, with the central bank announcing on Monday it held a record €127.7bn in bonds under its CSPP program - few are as bearish on credit as Morgan Stanley, which today issued ots 2018 US Credit Outlook which is, in a word, "dire."

It looks like BoJ Governor, Haruhiko Kuroda’s, minions are getting out and about to brief the financial news services that the biggest stimulator of all the central banks might reduce stimulus earlier than expected. The recipient of the unofficial briefings by BoJ officials is Reuters, which has this to say.

The Bank of Japan is dropping subtle, yet intentional, hints that it could edge away from crisis-mode stimulus earlier than expected, through a future hike in its yield target, according to people familiar with the central bank’s thinking.