Terry, there seem to be some very compelling deflation forces at work globally. The VIX is no where near 50
which is the levels it worked to in 1998, this has been so much more of a controlled burn.
some entertaining comments from briefing this morning on Japan:
--------Morning Briefing: Surprise, surprise! We went home last night figuring the Nikkei may be at about zero by the time we came in this morning, but such has clearly not been the case. While the Nikkei plunged below the 11,500 level in early trading, it managed to close 2.6% higher, back above the 12K level. The sharp bounce was largely a function of some contrition in the banking sector, as restructuring hopes were lifted by an announcement that the UFJ group (to be created April 1 by Sanwa Bank Ltd., Tokai Bank Ltd. and Toyo Trust & Banking Co) will write down bad loans totaling more than Y1 tln. The news helped to ease the heavy carnage in the banking sector, though most of the majors still closed to the downside.
Of course, the unexpected Nikkei bounce provided a much-needed lift for global equities, a dynamic that for the most part, has weighed modestly on Treasuries this morning. However, the JGB market still managed to close higher despite the enthusiasm in stocks. In fact, the June futures contract even managed to set a new historical high at Y140.01, before closing at Y139.78. The favorable tone was directly attributable to some rather friendly BoJ dynamics. Local press reports were abuzz with speculation of a return to the zero-rate policy on Monday, while talk of a quantitative easing also garnered some credibility. The Jiji news agency cited a senior BoJ official as saying that the bank could implement a "reserve targeting" through which the BoJ would target deposit balance at the bank's current accounts.
Such talk has led to a dramatic run-up in dollar/yen this morning, with the pair climbing as high as Y121.74 in recent trading. Easing speculation has also been supported by comments from BoJ Gov Hayami, who told Parliament last night that the central bank would hold discussions and make "appropriate" judgments its policy board meets Monday.------------- |
