This post comes via Zero Hedge and is, for me, the key question for just how bad the Mining GFC is going to get.
Year-to-date, BofAML’s Baraby Martin notes that the market narrative has swung wildly. “US recession…”, “global recession…”, “China devaluation…”, “commodity bust…” and “energy defaults…” have all been blamed as the major drivers of risk assets thus far in ‘16. The bearish concoction has left markets way down from their January levels. In credit, investment-grade spreads widened 16bp last month, and high-yield 36bp – the worst start to the year since 2008.
Over the last week, though, the “central banks to the rescue” narrative has also resurfaced. Not only has the BoJ embraced NIRP policies for the first time, but the ECB has strongly hinted at QE3 in March, and the Fed has added a dovish tinge to its outlook. “Yield”, as a secular theme, continues to stand tall, a full 7yrs after the GFC event. While the growth of negative yielding assets is now well flagged, it’s the other side of the coin which is talked about less: namely the decline in positive yielding opportunities.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
