When European Central Bank (ECB) president Mario Draghi stated that “deflationary forces have been replaced by reflationary ones” at the ECB Forum on Central Banking in Portugal on June 27, he knew exactly how the market would interpret that statement.
He had already declared that “the threat of deflation is gone and reflationary forces are at play” earlier in the same speech. He could have saved his breath and simply said “taper”.
That is what the market heard, and bonds responded accordingly.
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