BLOOMBERG HAS THE MOST CRYPTIC HEADLINES
http://www.bloomberg.com/news/articles/2015-05-03/draghi-starting-euro-bond-buying-turns-out-not-to-be-one-way-bet
The last of the gains made after the start of the European Central Bank’s bond-buying program vanished from the euro-area’s sovereign market last week. In the three months before the quantitative easing started on March 9, Portugal’s bonds earned three percentage points more than the mean for the region as a whole. Portugal, along with its Mediterranean neighbors, then underperformed the group, which on April 30 gave up the last of its QE-fueled gains.
ECB purchases didn’t quite make euro-area debt a one-way bet. A sudden rise in German bond yields last week showed the vulnerability of its euro peers. Investors didn’t like Portugal seeking to lock in lower borrowing costs by selling longer-dated bonds, a strategy that also led to higher yields when Italy attempted it in March.
“Since the ECB started buying bonds, we’ve seen some signs of opportunistic behavior on the part of governments, so generally we’ve seen more supply than expected,” said Elwin de Groot, senior euro-area strategist at Rabobank in Utrecht, Netherlands. “More supply in the periphery, extending maturities and flight to quality because of Greece. This all together has shaped the market.”
The reversal by Europe’s higher-yielding nations came after plenty of bullish momentum. Last month, only four years after getting an international bailout, Portugal’s two-year yields dropped below zero. That meant it had joined an elite group of European nations who charge investors for the privilege of buying their debt today and getting back less when they hold to maturity...Italian 30-year yields dropped to a record 1.78 percent in March, which is about 44 basis points less than the 2015 low on similar-maturity U.S. Treasuries. That was due to abundant liquidity resulting from ECB President Mario Draghi’s effort to pour cash into the real economy via the buying of 1.1 trillion-euro ($1.2 trillion) assets through September 2016.
A danger on the horizon for euro-area bond investors, particularly for the highest-yielding debt, is the ECB reducing asset purchases as the outlook for growth and inflation improves. Draghi has said the program won’t be curtailed before the ECB’s target date...
SNAFU IN THE EUROZONE
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