European Bond Yields Are Surging - Draghi, We're Gonna Need A Bigger Bazooka

Despite a good start, since early March when The ECB began its bond-buying bonanza, things have not been going the way Mario Draghi had hoped. While inflation data inflected modestly higher (cough oil cough), European bond yields (and peripheral bond spreads) have widened notably. Whether this is "sell the news" trading, Gross-Gundlach-driven unwinds, or Greek "serious disappointment" contagion (Greek 10Y bond yields are up over 200bps from the announcement in January of ECB QE) is unclear... but what is clear is that if ECB bond-buying is not pressuring yields lower then how can they hope to contain real Grexit contagion?

 

Since ECB QE announcement in Jan...

 

Since ECB QE began buying in March...

 

...Or was this the plan all along. Given the exhaustion of eligible securities that we have detailed, this 'modest' sell-off enables Draghi to spread his printed money across a wider range of bonds.

But for now - EU Peripheral bond risk is exploding...

 

And European Stocks are not having a great day - Greece down most in 3 months...

 

Charts: Bloomberg