The standoff between the “bulls” and “bears” continued this week as prices struggled to rise. The “bulls” continue to“hope” that the recent turmoil that started at the beginning of this year has come to an end. The “bears” continue to point out silly things like an ongoing earnings recession, weakening economic data, and deteriorating technicals to make their case.
Silly “bears”.
Interestingly, on Thursday, the ECB launched its biggest “bazooka” yet pushing further into negative interest rates, increasing their already failed QE program and crossing every finger and toe for “good luck.” Via the ECB:
“At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%, starting from the operation to be settled on 16 March 2016.
(2) The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%, with effect from 16 March 2016.
(3) The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%, with effect from 16 March 2016.
(4) The monthly purchases under the asset purchase programme will be expanded to €80 billion starting in April.
(5) Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.”
Question:
“What happens during the next global economic recession when these unsecured corporate bonds go bankrupt?”
If you remember, Lehman bonds were IG unsecured corporate bonds the DAY BEFORE they went into bankruptcy. That event sparked the global financial crisis. But this time will be different, right?
