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Who is afraid of credit ratings?

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  • One of the credit rating agencies (can anyone tell them apart?) cut Japan's sovereign credit rating to a level below that of Korea or China. The JGB market responded by taking 5 year yields to an all-time low of 0.095%. Owning JGBs for half a decade will return less than half a percent.
  • Fed speakers litter the agenda today. Chair Yellen is speaking to students (probably not market significant) but Vice-Chair Fischer (with a "C") is on a panel and may make some interesting remarks. Brainard is talking about paperwork (seriously).
  • The Euro area awaits the ECB decision on Thursday, and can pass the time with producer price inflation data. This is expected to come in negative, but a lot has to happen to producer prices before they become consumer prices, so it is not necessarily a deflation threat.
  • The Reserve Bank of Australia did nothing, which is what they have done all year. Inactivity is something the RBA (and the Australian rugby team) are getting good at. We do not see greater clarity on policy direction until after the release of Q4 consumer price inflation.

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