According to Bloomberg the first rate cut of 2015 occurred on January 1 by Uzbekistan. Since then, the cuts have come fast, with the People’s Bank of China (PBOC) on Saturday becoming the 17th central bank of the 57 monitored by Bloomberg to pare its benchmark. Poland is expected to be number 18 by the end of the week.
Bloomberg writes Norway, Hungry and Thailand are expected to cut rates later this month followed by South Korea in April.
The US is expected to increase rates between June and September.
I guess it is safe to write that there is an undeclared global war to devalue one’s currency in an attempt to boost exports and make debt burdens more tolerable but at some juncture it becomes a zero sum game.
Moreover, to write the obvious all countries are attempting to export their goods to the US but at some point the rising dollar hurts American exports thus slowing the proverbial global locomotive.
How will these defacto devaluations and negative interest rates by 25% of the global central banks coupled by the massive impending ECB QE impact the global market place?
Currently a select group of equities are myopically focusing upon the perceived positive aspect of this action—massive global liquidity which is partially gravitating to the most capitalized issues. But what happens when the proverbial party ends?
Treasuries were crushed yesterday as a second tier data point stated consumer purchases adjusted for inflation rose in January, a sign the plunge in gasoline prices in helping boost the biggest part of the US economy (and boosted import growth).
As stated many times, global central bank policy is attempting to force all further out on the risk curve but an argument can be made, the most “riskless” investment is now the most “risky” given the absolute low yields where any uptick will crush prices, the scenario that unfolded yesterday in the treasury market.
Was yesterday’s action in the treasury market be a harbinger of things to come? Does this “harbinger” relate to the few mega cap issues that have boosted stock indices? Some have suggested there appears to be a small manic bubble in the NASDAQ given its myopicy.
What will happen today? The economic calendar is quiet.
Last night the foreign markets were down. London was down 0.17%, Paris down 0.10% and Frankfurt down 0.05%. Japan was down 0-.06% Hang Sang Sang down 0.74%.
The Dow should open quietly lower. The 10-year is off 4/32 to yield 2.10%. Oil is about $1 barell.
