In the topsy-turvy world of negative rates, there are likely to be many unintended consequences. One is that IT systems may not actually be able to process negative rates. Bank regulation may also have negative effects too. For example, new research has found that stress tests have led to lower lending than would otherwise be the case.

Negative Interest Rates Threaten to Choke Bank IT Systems (itnews) Negative interest rates can strangle banks’ IT systems. Australia’s and New Zealand’s top banks confess they are struggling to make their transactional and mortgage systems cope with a switch to negative interest rates. [Bearish bonds]

Correlations, Value Factor Returns, and Growth Options (SSRN) Finds that looking at implied correlations could improve the profitability of value-based trading strategies. [Bullish value factor]

The Effect of U.S. Stress Tests on Monetary Policy Spillovers to Emerging Markets (Fed Working Papers) Fed finds that banks reduced their credit supply because of the stress tests. Also, finds that lending to emerging markets would have been higher had the US not introduced stress tests for their banks. [Bearish EM]