There lots of noise this week about the US President’s idea that the Government should default on China’s $1 trillion UST holdings as “revenge” for Coronavirus. OMG.

Today’s FT has a great article about the slashing of interest rates in this Nintendo Switch game. A monetary policy petri-dish.

The annual Deutsche Bank Default Study came out yesterday. It’s always a brilliant read. Defaults are going to be high this year, but probably no higher than they would have been in the absence of Covid-19. Intrigued?

S&P kept Italy’s rating at BBB, and Italian government bonds are rallying. But with Moody’s also about to determine its possible action on keeping Italy as investment grade or not, the risks of a downgrade remain present. Elsewhere - the Bank of Japan announced unlimited bond buying...

I once wrote a blog about the possibility of the U.K. government cancelling the gilts held by the Bank of England as part of the QE programme. Is that now becoming the consensus?

As developed market bond yields retest their all time lows, EM is behaving differently. A dependence on foreign capital flows means that they have seen both their currencies fall, and their bond yields rise. And maybe that defines an Emerging Market relative to a developed market? Also today - oil!

The RBNZ suggested last night that they’d consider monetising NZ’s debt. Elsewhere we talk about the fall in bond yields vs currency performance, and the US’s “exorbitant privilege”.

Oil prices just collapsed to 20+ year lows, and a couple of high yield energy names have now defaulted, with more to come. In today’s episode we also discuss Central Bank balance sheets, and another Argentinian sovereign default.

US companies have aggressively borrowed from their bankers over the last month as their earnings disappear under economic lockdown. The rules of those borrowings allow the banks to put the businesses into default if they breach certain metrics. Many are now breaching, but the banks are pretending it didn’t happen - the scale of the problem is too big to cope with.

Last week the US Federal Reserve announced the most startling monetary policy action of any Central Bank in this crisis: it’s going to buy High Yield ETFs, and also will regard Fallen Angels as investment grade!