The consequences for global markets of an end to ECB QE will be much bigger than those associated with the end of the Fed’s QE – Guillermo Tolosa, Oxford Economics
Huge ECB meeting on Thursday. Will Mario Draghi announce a path to normalize monetary policy and interest rates, which will burst the European bond market bubble?
Based on the 10-year interest rate-nominal GDP growth heuristic, German yields have a lot of runway to move higher once the ECB removes its thumb from the scale.
The below chart illustrates the German 10-year sovereign yield rarely closed on an annual basis below nominal GDP growth until the great financial crisis.
A close above 92 bps on Bund on the weekly and it’s off into the “great wide open.”
Stay tuned, Eddie.
Global Macro Monitor 