How eurozone QE is reshaping the bond markets
If Europe’s economy remains in crisis, then someone please tell the bond markets. The ECB’s asset purchase programme has driven half of the EU’s sovereign debt pile into negative yield territory. And Draghi’s plan has only just started. Funds see little choice but to follow the QE monster on its path of destruction through the yield curve. Will that lead to the surreal outcome of all EU sovereigns yielding the same, regardless of credit quality?
Germany, Switzerland, fine. But Ireland?
On March 19 Ireland’s National Treasury Management Agency (NTMA) sold €500 million of short term T-bills at a negative average yield of 0.01%. Investors are now paying for the privilege of lending money to a sovereign that only exited its €67.5 billion Troika bail-out programme in December 2013 – 15 months ago – and had a gross government debt-to-GDP ratio of 110% in 2014.