It's been pretty hard to square low German bond yields with rising inflation, and this week has finally see the dam break, with 10-year yields soaring. New corporate bond issues were hardly to be seen on Friday.
This is only going to give the Bundesbank company in its calls for the European Central Bank to end, or at least severely curtail, its Public Sector Purchasing Program before its current planned expiry at the end of 2017.
While President Mario Draghi might feel comfortable looking through a jump in headline inflation, a move above 2 percent for German CPI would be a game changer in efforts to end QE.
Something has to give and for now it is German bonds' incredibly low or negative yields, despite ongoing ECB purchases. Inflation and growth are back, and the end should be in sight for QE. The bigger problem is that when German bonds sneeze, the periphery catches pneumonia.
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