Today, we had 1 deposits into the dealer account: 

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  36.49  and Brent: 39.30

3f Gold UP  /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil UP for WTI and UP for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES  to 0.207%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 10.49%/: 

3j Greek 10 year bond yield FALL to  : 9.89%  (yield curve INVERTED)

3k Gold at $1269.75/silver $15.67 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble UP 3/100 in  roubles/dollar) 71.84

3m oil into the 36 dollar handle for WTI and 39 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9998 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0955 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 year German bund now  in negative territory with the 10 year RISESto  + .207%

/German 8 year rate negative%!!!

3s The Greece ELA NOW at  71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.90% early this morning. Thirty year rate  at 2.71% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

In the aftermath of last week’s disappointing G-20 Shanghai summit, there was much riding on this weekend’s start of the China’s People’s Congress, and specifically what if any stimulus announcement Beijing will make; sadly for stimulus addicts China disappointed and after the unimaginative scope of growth proposals none of which it will come remotely close to hitting, it is hardly surprising that European stocks and US equity futures have taken a leg lower, even if Chinese stocks rose and certain commodities such as Iron Ore soared overnight on hopes China will either “rationalize” capacity or at least build some more roads to nowhere. Others, such copper were less lucky.

While few will admit, what is happening is that China has effectively confirmed the current reform cycle has been a failure and is going back to square one: as Nicola Marinelli, a fund manager at Pentalpha Capital In London told Bloomberg, “China is serving more of the same solution, more stimulus, but it just makes things worse later and it’s becoming apparent that it cannot sustain the official growth rate.

Elsewhere, European banks are starting to slide now that attention turns to Thursday’s ECB meeting when Mario Draghi is expected to further cut the European deposit rate by 10 to 20 bps, in the process further impairing bank profits. On this Marinelli said, “the ECB might also disappoint, GDP growth remains sub-par and we don’t know what to do about it, while a higher oil price means higher inflation soon and hence less headroom for central banks.”

Aside from equities, the oil ramp has shown some further strength overnight as “weak hand” shorts continue to be squeezed, while gold’s levitation continues on concerns how other central banks will respond in the global currency war in retaliation to the ECB’s further monetary easing this week.

WTI extends gains to 2 month highs after the U.S. rig count fell to lowest since Dec. 2009. Brent touches highest since Dec. amid speculation ECB will increase stimulus when it meets Thursday. “On the supply-side we are continuing to see a freefall in the rig count, which confirms what has been the U.S. supply outlook for some time that we’d see production stop gaining and decline this yr,” says Danske Bank senior analyst Jens Pedersen. “The rate the rig count has fallen means output may decline harder than what was expected.”

As of this moment, according to Bloomberg, European shares fell with metals, while the dollar and German bonds climbed, as investors assessed the impact of China’s growth plans and the potential for European Central Bank stimulus measures this week. Miners led declines in the Stoxx Europe 600 Index, with Glencore Plc and Anglo American Plc among the biggest losers, a turnaround from last week’s rally. Copper fell from a four-month high, while investors continued adding to gold holdings. French bonds led gains in euro-area government securities, while the euro sank on speculation the ECB will lower the deposit rate and boost bond purchases. Crude extended last week’s gains.

The Stoxx 600 was down 0.8 percent as of 11:06 a.m. London time, while copper sank 0.8 percent. The euro fell 0.5 percent to $1.0956 and yields on German 10-year bonds fell three basis points to 0.2 percent.

Where the markets stand now:

• S&P 500 futures down 0.5% to 1986
• Stoxx 600 down 0.9% to 339
• FTSE 100 down 0.9% to 6145
• DAX down 1.3% to 9695
• German 10Yr yield down 4bps to 0.2%
• Italian 10Yr yield down 2bps to 1.44%
• Spanish 10Yr yield up 2bps to 1.58%
• MSCI Asia Pacific down 0.2% to 126
• MSCI Asia Pacific down 0.2% to 126
• Nikkei 225 down 0.6% to 16911
• Hang Seng down less than 0.1% to 20160
• Shanghai Composite up 0.8% to 2897
• US 10-yr yield up 3bps to 1.9%
• Dollar Index up 0.25% to 97.59
• WTI Crude futures up 1.1% to $36.32
• Brent Futures up 1% to $39.10
• Gold spot up 0.7% to $1,268
• Silver spot up 1.2% to $15.70

Top Global News:

• Jefferies Said to Reorganize Leveraged Finance, Promoting Walsh: Unit chief Lockhart, sponsors head Sokoloff said to leave bank. Firm looks to boost coordination between unit, joint venture
• Wells Fargo Said to Seek Dealmaking Chief to Succeed Laughlin: Seeking a new head of mergers and acquisitions to succeed John Laughlin, who will serve as vice chairman of the business
• United’s Munoz Returns as CEO Next Week After Heart Transplant: Chief had undergone transplant surgery in early January. ‘I’m ready to join you,’ he tells airline workers in a video
• Apple Software Chief Warns One Phone Break-in Can Wreak Havoc: Federighi argues government order seeks to weaken security. Criminals could exploit IPhone backdoor once created

Looking at regional markets, we start in Asia where stocks traded mostly higher following last Friday’s positive close on Wall St. where firm Non-Farm Payrolls figures and a resurgence in the commodities-complex boosted sentiment. ASX 200 (+0.93%) and the Shanghai Comp (+0.65%) was led higher by commodities after WTI broke above the USD 36/bbl level and iron ore extended on gains to hit limit up in Shanghai. Elsewhere, Nikkei 225 (-0.44%) underperformed as large exporter names were pressured by JPY strength.

Chinese Premier Li announced a GDP growth target range of between 6.5%-7.0% for this year vs. about 7.0% target last year, which is the first time China has opted to target a growth range in 20 years. Premier Li also announced details of China’s 5 year plan in which it aims for minimum growth of 6.5% annually through to 2020 and will also introduce a range of tax cuts this year. (Nikkei)

Top Asian News

• CLOs Revived in Japan for First Time Since 2011 Amid Yield Hunt: Japan Finance Corp is set to sell 7.5b yen ($66m) of bonds backed by loans of regional banks
• Australia Sees Resources Price Rebound as Supply Gluts Ease: Commodity demand will rebound on Asia’s urbanization, population to spur demand, Resources and Energy Minister says
• China Said to Plan Crackdown on Loans for Home Down- Payments: Chinese regulators plan to impose new rules, as they step up scrutiny of financing risk in property markets
• China’s Growth Addiction Leaves Deleveraging in Back Seat: Baseline of 6.5% GDP growth through 2020 curbs policy scope, more fiscal, monetary support on its way, as is more debt
• Malaysia Palm Reserves Seen at 11-Month Low as Output Falls: Feb. production seen at lowest since 2011

Despite the apparent risk on sentiment observed over during the Asian trading session, partly in reaction to supportive comments by Chinese Premier Li, positioning ahead of key risk event meant that stocks traded lower since the get-to in Europe. At the same time, combination of profit taking and healthy scepticism by some IB names in relation to the recent upside in base metals, meant that material names underperformed on the sector breakdown. The cautious sentiment also translated into upside bias by Bunds, though Gilts have underperformed amid the ongoing Brexit concerns. Though peripheral bond yield spreads traded mixed, with GR/GE 10y wider by 5bps, while FR/GE 10y spread tightened by 1bps.

Top European News

• EDF Finance Chief Resigns as U.K. Hinkley Point Decision Nears: Piquemal said to be worried that final decision being rushed. Executive expressed concern over financial impact of project
• BASF Said Working With Banks to Weigh Counter-Bid for DuPont: German chemicals company said undecided whether to proceed. BASF said to have spoken to DuPont last year before Dow merger
• Old Mutual Rises Most in Three Months on Speculation of Breakup: climbed in Johannesburg trading after the company said it’s considering all options for the business as part of a strategic review. Co. also traded in London

In FX, there are few discernible themes to note today. We would have expected some adjustment lower in the EUR pairs, but the lead spot rate dropped back from 1.1000+ highs to find fresh support in the mid 1.0900’s. All eyes and ears are on the ECB meeting this week, and despite fears that policy action will not be ‘enough’ to appease the market, the disappointment factor is prompting EUR support already. Cable is suffering a little as EUR/GBP grinds higher — this despite the latest YouGov poll showing the ‘stay in’ camp maintaining a lead for 4 consecutive weeks. Pressure on USD/JPY and the respective cross rates as BoJ Kuroda continues to warn against fresh policy expectations. Spot now back in the mid 113.00’s, but no real momentum on the downside to note as yet. Oil prices holding up, but the CAD off better levels along with the AUD and NZD.

The energy complex largely shrugged off downbeat sentiment that dominated the price action over the Europe, with both WTI and Brent crude futures trading higher, as the focus remained on the better than expected US data and the ongoing reduction in US rig count. Elsewhere, copper prices declined marginally from 4-month highs on profit taking, while iron ore continued to surge alongside steel rebar gains with both hitting limit up in early Shanghai trade which in turn saw Singapore iron ore futures advance over 16% amid expectations steel mills will be ramping up production.

Iranian oil official stated that Iran’s oil and gas condensate exports are to hit 2mln bpd by month-end. (SHANA) Also of note, it was reported citing UAE minister stating that the state has not received an invitation for oil producers meeting.

Looking at today’s event calendar, the only data of note in the US this afternoon is the January consumer credit reading.

Bulletin Headline Summary

• Cautious sentiment dominated the price action as market participants position for the upcoming ECB policy meeting
• EUR/USD failed to benefit from the un-wind of carry-related flow and instead the price action was dominated by pre-positioning ahead of the eagerly awaited ECB policy meeting
• Going forward, there is little in terms of tier-1 economic releases and the price action is widely expected to remain a by-product of ECB based policy expectations
• Treasuries lower in overnight trading with global equities dropping, WTI crude oil rises above $36/barrel ahead of this week’s ECB meeting and $56b in U.S. auctions beginning tomorrow.
• ECB has unleashed stimulus at 10 of the 47 monetary-policy meetings since Draghi took the helm; for this week’s decision, economists in a Bloomberg survey are nearly unanimous in predicting action; For banks operating in the country to have endured negative interest rates longer than any other place on earth, last year was actually pretty good
• German factory orders dropped 0.1% in January from the prior month, when they slid 0.2%, in a sign that a global slowdown and weak domestic pricing power may be hurting Europe’s largest economy
• In meetings with Iranian leaders Greek Prime Minister Tsipras pressed for measures to encourage Afghan refugees currently in Iran to stay there
• Bank of Japan Governor Haruhiko Kuroda said Monday that the impact of a sales tax increase scheduled for April 2017 would be much less than the hike in 2014 — which sent Japan into a recession (Harvey:  no way!!)
• China’s foreign-exchange reserves dropped by $28.6 billion to $3.2 trillion in February, its smallest decline since June, as the nation’s financial markets stabilized and policy makers took more steps toward shoring up growth
• Persistent capital outflows from China since mid-2014 were probably driven more by local companies paying down their dollar-denominated debt — in anticipation of a stronger U.S. currency — than investors ditching assets, according to the BIS
• Demand is so great for benchmark 10-year Treasuries in the $1.6 trillion market for borrowing and lending U.S. government debt, and supply so short, that the overnight repo rate on the newest 10-year note was negative 2.7% at the end of last week
• Bill Gross said Treasuries will draw support from investors seeking alternatives to near-zero yields abroad, aiding the market as the Federal Reserve raises interest rates
• $350m IG corporates priced Friday; week $59.225b, YTD $336.075b
• $475m HY priced Friday, $3.65b on the week, $16.33b YTD
• BofAML Corporate Master Index OAS 4bp lower Friday at +195, -11bp MTD, +21bp YTD; T1Y range 221/129
• BofAML High Yield Master II OAS 20bp lower Friday at +708, -27bp MTD, +13bp YTD; T1Y range 887/438
• Sovereign 10Y bond yields mostly steady; European, Asian markets lower; U.S. equity-index futures rise. WTI crude oil, gold rally, copper falls

DB’s Jim Reid concludes the overnight wrap

No doubt about what the big event of the week is…. Liverpool vs. Man U in the Europa League. As a warm up act we have the eagerly anticipated ECB meeting on the same day. I’m not sure if one is ever meant to feel sorry for central bankers, but this Thursday’s meeting is an incredibly hard one to calibrate for a variety of reasons. Firstly the market which was in panic mode 3-4 weeks ago is slowly regaining poise partly on expectations of action from the ECB and partly on higher oil and better recent US data. So expectations had been building up in weaker markets than we’re seeing now. However European data has been disappointing over this period relative to the US and inflation expectations are going lower again with lingering worries about what the recent sell-off in bank equities might mean for lending and thus growth going forward.

Like with the December meeting, expectations are high but 3 months further on the market is going to not only be sensitive to the scale of action but also the nuances. Simple standard cuts further into negative deposit rate territory could easily be seen as negative for banks and in turn the economy and markets if it’s perceived to impact their profitability and thus the transmission mechanism. As Mark Wall pointed out to me even front loading/increasing QE is a risk if it flattens curves further and erodes net interest margins. On the other hand being kind to banks might be seen as counter-productive medium-term as the ECB is keen for banks to adjust to the new world and find a more sustainable business model. So although policy aimed at increasing bank profits might be good for the economy in the short-term it’s hard to imagine the ECB sanctioning this without being in a deep crisis.

So where are DB’s expectations given all this? Mark Wall thinks we’ll see a two-tier system producing a cumulative fall in the Eonia rate of about 10bps. Note that this implies a much larger cut on the rate attached to the lowest tier. Second, his expectation is for new TLTRO auctions until the end of 2017. To further incentivise lending the ECB could decide to introduce a dedicated negative refi rate only for the TLTROs but there remains the risk that the Governing Council sees a negative refi rate as an unwarranted relief for banks. Third, the Governing Council could compromise by agreeing upon a temporary EUR 10bn acceleration in the pace of its monthly QE purchases. Mark feels his team is at the lower end of market expectations, and overall the risks are skewed towards less action. To sum up in a sentence, for the market to be happy it probably wants to see some way of prioritising credit easing over QE/simple deposit cuts.

All that to look forward to on Thursday but in the meantime the bulk of weekend’s newsflow has been focused on China and specifically the important snippets of information which have come out of the NPC. As widely expected we’ve had confirmation from the Premier Li Keqiang that the government is targeting GDP growth of between 6.5% to 7.0% this year (remember this had already been mentioned by the head of the NDRC back in January), with 6.5% also being set as the baseline rate through to 2020. In order to achieve this, the Premier is also proposing for a budgetary fiscal deficit of 3.0% of GDP this year, up from the 2.3% target last year (and 2.4% actual number). As well as this, the M2 growth target has been raised to 13% from 12% and the CPI increase is to be kept around 3%. Commenting on the announcements, DB’s Zhiwei Zhang thinks that the actual fiscal deficit and M2 growth may well exceed their targets again in 2016. Zhiwei highlights that Premier Li reiterated the government will try to avoid a massive general fiscal stimulus, but the recent policy actions seem to suggest a quite significant policy easing, including record high new loans in January, a rapid rise of bond issuance, a RRR cut and lower down payments required. This is suggesting that the overall fiscal policy stance may loosen more than the central government fiscal deficit suggests and Zhiwei is forecasting for the deficit to reach 4%, while on the monetary side he expects M2 growth to reach 14%.
Meanwhile, two announcements that have surprised Zhiwei from the work plan are the growth rates of budgetary fiscal revenue (cut to 3.0% from 5.8%) and expenditure (cut to 6.7% from 8.0%) being lower than they were in 2015, and secondly the work plan being less ambitious relative to 2015, on capital account liberalization and RMB internationalization. Zhiwei and his team maintain their growth forecast of 6.7% this year, with Q3 and Q4 in particular showing slowdown. They expect two more interest rate cuts in H2 and 3 more RRR cuts, one in each quarter beyond Q1.

Bourses in China have kick-started the week on the front foot post the weekend newsflow with the Shanghai Comp and CSI 300 up +0.78% and +0.59% respectively at the midday break, while the tech heavy Shenzhen has rallied for a +2% gain. Markets are also waiting on China’s latest FX reserves data which is due out at any stage now, while headlines this morning on Bloomberg suggesting that Chinese regulators are to stamp down on loans for house down-payments is also attracting some focus.

Elsewhere it’s a bit more mixed across the Asia region this morning. The Nikkei is down -0.47%, the Hang Seng is flat but has been volatile on the back of the news that Hong Kong residential home sales were said to have fallen 70% yoy in February, while there’s been gains for the Kospi (+0.26%) and ASX (+1.17%). Credit markets in Asia and Australia are flat to modestly tighter.

Meanwhile the US Presidential race – and specifically the Republican battle – has seen Ted Cruz pick up two victories in Kansas and Maine, with Trump taking Louisiana and Kentucky. Importantly, the victories for Cruz have seen him solidify his role as the main challenger to Trump in the Republican race in what’s looking now like a two-horse race.

Moving on. So after the whisper number had been leaning lower heading into Friday’s employment report, February nonfarm payrolls proved to be a big surprise to the upside with a robust and consensus beating +242k (vs. +195k expected) of job gains including 30k of upward revisions to prior months. In fact the number was higher than 91 of the 92 Bloomberg economist forecasts with retail and healthcare sectors leading the charge and defying that weaker ISM services employment print which had people nervous. The other good news was the U-3 unemployment rate holding steady at 4.9% as expected, the broader U-6 measure edging down two-tenths to 9.7% and the lowest since May 2008, while the labour force participation rate ticked up two-tenths to 62.9% (vs. 62.8% expected) and the highest since July 2014. It wasn’t all good news however. Notably, average hourly earnings unexpectedly declined last month by -0.1% mom (vs. +0.2% expected) which had the effect of dragging down the YoY rate by three-tenths to 2.2%. As well as this, average weekly hours worked fell from 34.6 hours to 34.4 hours. While some of the chatter blamed the softer earnings data in particular on the timing of the survey, much of the debate switched towards the slowdown in hours rather than employment being an obvious response to weak productivity.

The initial reaction in markets was for the US Dollar to rally and equities to wipe out the bulk of the day’s gains. That was until the energy markets had their daily say. WTI (+3.91%) rallied to finish up close to $36/bbl (with the latest rig count decline boosting sentiment) to cap a near 10% rally over the week, while base metals also continued their strong run on Friday with Copper (+3.55%), Nickel (+3.78%) and Iron Ore (+4.98%) all up strongly. That saw European equities bounce back into the close (Stoxx 600 +0.70%) while the S&P 500, after initially opening in the red, finished +0.33% and a whisper below the 2000 level (closed at 1999.99) for its fourth consecutive daily gain and the longest such run since October. The USD index closed -0.38% with EM currencies the big winners yet again, while 10y yields edged up 4bps to 1.874%

Meanwhile the rally in credit continued with CDX IG another 2.5bps tighter on Friday, the eight day the index has finished stronger. European credit rallied too (Main -3bps, Crossover -15bps) while in a sign of how quickly sentiment can turn, BNP Paribas issued a subordinated bond deal on Friday, the first such deal by a European financial since the volatility which swept over the sector towards the end of January. The bonds ultimately pricing at the tight end of guidance.

Away from this the only other data of note was a confirmation of a widening in the US trade deficit to $45.7bn from an upwardly revised $44.7bn in December. The Fed’s Kaplan also spoke again, saying that while he was pleased with last month’s employment report he still wants to see more evidence that the Fed will meet its inflation objective and that the Fed doesn’t have many tools left should the US fall into another recession.

Onto this week’s calendar now. Kicking off proceedings this morning in Europe is Germany where we’ll receive the January factory orders, followed closely by the latest Euro area investor confidence reading. The only data of note in the US this afternoon is the January consumer credit reading. It’s a busy morning for data in Asia tomorrow with the final revision to Q4 GDP in Japan, as well as the all important February trade numbers out of China. In Europe Germany industrial production and French trade data is due out prior to the preliminary reading for Euro area Q4 GDP (+0.3% qoq expected). It’s another quiet afternoon in the US on Tuesday with just the NFIB small business optimism print due. Wednesday is a light day for data all round with just French business sentiment and UK industrial production due in the morning, followed by the January wholesale inventories and trade sales data for the US in the afternoon. The focus of Thursday morning is in China again where we’ll get the February CPI and PPI prints, along with Japan PPI data. In Europe we’ll see German trade data and French industrial production prior to the main event of the week in the ECB monetary policy meeting in the early afternoon, with Draghi scheduled to speak after. In the US on Thursday we’ll see the latest initial jobless claims data along with February Monthly Budget Statement. We close the week on Friday in Europe with the final revision for Germany CPI in February and UK trade data. The final data of the week in the US is the February import price index.

Away from the data the only Fedspeak of note comes today when we’ll hear both Vice-Chair Fischer and Governor Brainard speak at 6pm tonight. Away from this the Euro area Finance Minister’s meeting in Brussels today may be worth keeping an eye on along with the emergency meeting between EU leaders on the refugee crisis this afternoon. We’ll also be keeping up to date with any further interesting information from the National People’s Congress in China.

Let us begin;

ASIAN AFFAIRS

Late  SUNDAY night/ MONDAY morning: Shanghai closed UP BY 23.19 POINTS OR 0.50% ON A LAST HR RESCUE, /  Hang Sang closed DOWN by 16.98 points or  0.08% . The Nikkei closed DOWN 103.46 or 0.41%. Australia’s all ordinaires was UP .1.04%. Chinese yuan (ONSHORE) closed DOWN at 6.5176.   Oil GAINED  to 36.49 dollars per barrel for WTI and 39.30 for Brent. Stocks in Europe so far IN THE RED . Offshore yuan trades  6.5187 yuan to the dollar vs 6.5176 for onshore yuan/ LAST WEDNESDAY, MOODYS DOWNGRADES CHINA’S CREDIT FROM STABLE TO NEGATIVE.  At the big people’s congress where they meet to set a 5 year plan, the leaders failed to deliver a major fiscal stimulus package. However instead they made very promises:

Deutsche bank discovers that by looking at Japan’s NIRP, instead of increase spending, we are getting the opposite as citizens fear something is run and they increase their savings:

Last October, BofA looked at Europe’s €2.6 trillion in negative-yielding debt and discovered something“stunning”: Savings rates were going up not down.

Don’t believe us, just have a look at these three charts:

But how could that be? By all accounts – or, should we say, by all conventional Keynesian/ textbook accounts – negative rates should force people out of savings and into higher yielding vehicles or else into goods and services which “rational” actors will assume they should buy now before they get more expensive in the future as inflation rises or at least before the money they’re sitting on now yields less than it currently is.

Well inflation never rose for a variety of reasons (not the least of which was that QE and ZIRP actually contributed to the global disinflationary impulse) and nothing will incentivize savers to keep their money in the bank like the expectation of deflation.

Well, almost nothing. There’s also this (again, from BofA): “Ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.”

Why that’s “perverse,” we’re not entirely sure. Fixed income yields nothing, and rates on savings accounts are nothing. Which means if you’re worried about your nest egg and aren’t keen on chasing the stock bubble higher or buying bonds in hopes that capital appreciation will make up for rock-bottom coupons (i.e. chasing the bond bubble), then as Gene Wilder would say, “you get nothing.” And that makes you nervous if you’re thinking about retirement. And nervous people don’t spend. Nervous people save.

Deutsche Bank has figured out this very same dynamic. In a note out Friday, the bank remarks that declining rates have generally managed to bring consumption forward.

The impact of interest rates (nominal or real) on consumption is generally derived from a two-period consumption model. Under a given budget constraint, declining interest rates front-load consumption in the current period at the expense of the second-period consumption (inter-temporal substitution effect). Japan’s household saving rate has been constantly falling since the early 1990s.

But, there’s a limit.

Essentially, the bank argues that NIRP may be the shocker that wakes the public up to the fact that if negative rates exert a negative (no pun intended) effect on long-term household balance sheets, they will stop spending. To wit:

Even if inter-temporal consumption substitution occurs from now on, if the introduction of negative interest rates reminds households of a slower pace of their future accumulation of financial assets, namely suggesting a worsening of lifetime household budget constraints, households would be forced to cut back on consumption in both the current and next periods.

So there it is again. More evidence that Europe’s (and soon to be Japan’s) adventures in NIRP are destined to fail. Surprise, surprise.

But double-, triple-, and quadruple- down they most certainly will (starting this week with Draghi) until either one of two things happens: 1) they eliminate physical cash and take rates so punitively low that saving money in a bank will wipe out your nest egg in the space of a year, or 2) they drop money from the sky in a desperate attempt to inflate away all of this debt, a move which will be swiftly followed by the ultimate Keynesian endgame or, as one might call it, “a triumphant return to Weimar.”

Portuguese 10 year bond yield:  3.14% UP 4 in basis points from FRIDAY

Will Russia End Up Controlling 73% of Global Oil Supply?

WTI Crude Spikes To $37, Brent Over $40 After Genscape Signals Cushing Draw