“The definition of insanity...
...is doing the same thing over and over again,
but expecting different results.”
-Albert Einstein
On that note, the Bank of Japan (BOJ) went ahead and implemented the “QQE with Yield Curve Control” plan (i.e. a -0.1% policy rate and a centrally planned 0.00% 10yr Yield rate).
Q: WHAT’S THAT GOING TO DO FOR japan's ECONOMY?
A: NOTHING.
Here's a quick breakdown of the BOJ's policy announcementt:
- BoJ to change maximum scale of each ETF buying operation
- ...to continue buying JGBs at ¥80T annually
- ...to conduct policy to influence interest rates
- ...to extend fixed-rate fund-providing operations to 10-yrs from 1-yr
- ...to begin fixed-rate JGB buying operation
- ...to increase monetary base until inflation goes above 2%
- ...adopts inflation-overshooting commitment
- ...scraps 7-12 year JGB buying duration period
- ...to use QQE with yield curve control
#Riveting, eh? Yep. A whole lot of nothingness emerged from the latest central-market-plan to literally not let the Japanese 10yr Yield move from 0.00%. With a policy rate of -0.1%, you’re going to need a microscope to see that Bad Sushi Yield Spread.
For more insight on Japan, take a look at our Senior Macro analyst Darius Dale's "The BOJ's Stench of Desperation."
Globally...
Macro markets doing a big yawn post the BOJ event and I have to admit that some of the “rates are gonna rip” theories are quite clever at this point; not as P&L practical as simply getting #GrowthSlowing right in 2016, but definitely clever! US Treasury 10yr Yield immediate-term risk range = 1.55-1.75%. I’m a buyer of long-term bonds on any move > 1.70%
Editor's Note: The note above is from this morning's Early Look written by Hedgeye CEO Keith McCullough. Click here to subscribe.