ECB Loses Its Grip, Bond Market Comes Unglued

Thursday, June 4, 2015
By Paul Martin

by Wolf Richter
WolfStreet.com
June 3, 2015

The EU’s top regulator for insurers and pension funds, the EIOPA, wasn’t kidding when it warned that the ECB’s €60-billion a month money-printing and bond-buying binge was triggering treacherous “volatility” in the bond markets. “Volatility” isn’t actually the right word. It implies ups and downs. But since QE started in March, euro sovereign bonds have experienced a brutal rout, interspersed with brief periods of calm just long enough for investors to lick their wounds, followed by a brutal rout yesterday and today.

On Tuesday, ahead of the ECB’s policy announcement today, German Bunds sagged, and the 10-year yield soared from 0.54% to 0.72%, drawing a squiggly diagonal line across the chart. In just one day, yield increased by one-third!

Makes you wonder to which well-connected hedge funds the ECB had once again leaked its policy statement and the all-important speech by ECB President Mario Draghi that the rest of us got see today.

And today, the German 10-year yield jump to 0.89%, the highest since October last year. From the low in mid-April of 0.05% to today’s 0.89% in just seven weeks! Bond prices, in turn, have plunged! This is the definition of a “rout.”

The Rest…HERE

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