Is it any wonder Mario Draghi didn't lift a quantitative-easing finger this week? Despite record unemployment, record (and disastrous youth unemployment), record suicide rates, record non-performing loans, and an inextricably-linked banking system facing $3 trillion in exposure to emerging markets... Spanish bond yields have collapsed to their lowest since 2006 (and Italian close behind). With an entirely broken transmission mechanism of monetary policy, it seems the "market" for European bonds knows no bounds as spreads on the riskiest sovereigns drop to pre-crisis levels and 10Y Spain yields are now lower than 30Y US Treasuries.
Europe must be fixed?
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Spanish 10Y yields are now back below US 30Y yields for the first time in 4 years...
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With the European banks holding the bulk of this crap and facing what many HOPE is a real stress test; we can only imagine the contagion should fears ever re-ignite - though we always have the magical OMT.
It seems much of this exuberance is the hope that a European think-tank expressed that March will see the ECB announce QE... as usual, any minute now.
Chart: Bloomberg