Rabobank: "Global Central-Bankery Continues To Go Where No-One Has Gone Before"

Submitted by Michael Every of Rabobank

Stocks at new recorder record highs; bonds up (yields down); CNY up; broad USD DXY up; China issuing USD6bn of sovereign debt at a narrow spread over USTs….it’s all up, up, and away. And why not? Trump tells us the US is “in the final throes” of a phase one trade deal with China. Usually that language is used to imply something is dying, but hey ho, decimate is used to mean annihilation rather than killing one in ten of the enemy, and quantum leap is used to imply something big when it actually means something amazingly small. Suffice to say markets loved it. So much so in fact that it is a song we should keep singing over and over, like another ‘final’- “The Final Countdown”.

Three decades after Europe’s pop-metal kitsch classic first hit the charts, they are still out there playing it, and whenever anyone hears the keyboard intro “Deedle deedle….deedle dee”, everyone knows the song and joins in enthusiastically: how can you not? As such, I suggest that from now on, every time the White House talks about the impending phase one trade deal coming soon, to save time they just play the track for the press. Or just the keyboard intro. And rallying markets can continue to trade off the deep wisdom of the lyrics:

“We're leaving together; But still it's farewell; And maybe we'll come back; To earth, who can tell?

I guess there is no one to blame; We're leaving ground (leaving ground); Will things ever be the same again?

It's the final countdown; The final countdown”

And indeed, will things ever be the same again in markets? Not just because of the constant dangled promise of a trade deal that the vast majority of those working in those same markets admit is unlikely to mean much of anything; but because global central-bankery continues to go where no-one has gone before. Mass asset-purchases; negative rates; ‘Not-QE’; yield curve control--Brainard says the Fed should use asset purchases to cap yields on short- and medium-term Treasuries, a-la BOJ, where it hasn’t worked, of course--and, shortly no doubt, solving the global climate crisis and inequality! In their special central-bank minds, *this* is the voyage all the rest of us are mere passengers on:

“We're heading for Venus (Venus); And still we stand tall; 'Cause maybe they've seen us (seen us); And welcome us all, yeah

With so many light years to go; And things to be found (to be found); I'm sure that we'll all miss her so…”

But then back to that trade deal:

“It's the final countdown; The final countdown; The final countdown; The final countdown; Oh, The final countdown, oh It's the final count down; The final countdown; The final countdown; The final countdown; Oh; It's the final count down.”

And then back to central banks and that trade deal working together:

“We're leaving together; The final count down; We'll all miss her so; It's the final countdown; It's the final countdown; Oh; It's the final countdown, yeah.”

What a hit it is!