Once again, we begin with Japan. Speculative accounts’ net yen position had spiked in recent weeks. That must have been extremely painful on Friday morning as the yen gave up almost 2%. It will be interesting to see who got caught in this surprise BoJ move.
Source: Investing.com
In the bond markets the 10-year JGB yield falls below 7 basis points this morning, a new record low, …
… while the 5-year yield moves deeper into negative territory. Will this force JGB investors into “riskier” domestic markets or just send them abroad?
In fact according to JPMorgan (via the Financial Times), the total balance of government bonds with negative yields hit $5.5 trillion after the BOJ action on Friday. Incredible.
Source: @FT
Continuing with the theme of negative bond yields, here are the 5-year French and German yields – both at new lows.
Staying with the Eurozone, the recent market jitters are making their way through the area’s economy. Loan and money supply growth came in below consensus.
Source: Investing.com
Source: Investing.com
To give Draghi even more ammunition for an additional easing move, Spain is still struggling with deflation. Here is a month-over-month and a year-over-year CPI chart.
Source: Investing.com
We had some positive news from France where business investment in 2015 rose sharply. Hopefully this can be sustained given all the market uncertainty.
Source: ?@ecoeurope, @MarkDeen1
According to Bloomberg, investor attention has shifted to the Bank of England as the next central bank to ease. The short-term implied vol on GBP/USD options has spiked as traders bet the BoE will respond to the BoJ. This is somewhat surprising, given that while the BoE is clearly concerned about disinflationary pressures, the UK economy remains relatively robust.
Source: @markets
We’ve seen some relief for the Swiss National Bank in the currency markets. In spite of the ECB’s dovish stance, the Swiss franc has been weakening lately. Some of this was driven by the SNB selling Swiss francs (buying euros), but whatever the case the central bank has been able to stabilize the nation’s currency. This is very much needed to keep the country’s most severe deflation from worsening.
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