Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

Europe's year of political turmoil is already stress-testing its bond market. 

While yields this month have been heading higher for the weaker peripheral nations and France, they're turning back down for Germany, as well as the U.S. and U.K. A flight to safety is a perturbing sign that a shift to risk off may have some legs to it.

Fright to Quality
Risk off benefits the major markets as peripherals take the strain
Source: Bloomberg

Tensions around the region's heavy election calendar were already well flagged in 2016.  European harmony has deteriorated, and it is no longer just the Italian banks grabbing the headlines. Progress on resolving Greece has reversed, with the International Monetary Fund board in dispute with itself and in a standoff with the European Union. Peripheral governments are pushing back on extending austerity just as the core EU nations want to reduce their aircover by tapering QE. 

The woes are also showing up in the single currency. 

February Is at Least the Shortest Month
Political turbulence is hitting Europe's Grand Projet
Source: Bloomberg

France's newfound companionship with the periphery is a sign of how deep the worries are running. The year may have started out with a relatively calming expectation that a strong candidate could stand up to Marine Le Pen in presidential elections. But Francois Fillon and Emmanuel Macron are no longer striding quite so confidently forward to election day. 

French Floundering
French OATS hit the widest to German Bunds since November 2012
Source: Bloomberg

It is not just politics, though, as heavy supply this month, following on from a record January, is clearly weighing on investors.

Everyone's ramming in. After Tuesday's Dutch and Belgian deals, Germany and Portugal are due on Wednesday and then Ireland on Thursday. Spain, Austria and Italy are due to bring syndicated deals outside their usual auction roster later this month.

The indigestion has already started. Investors were expecting the European Financial Stability Facility to issue 3 billion euros this week, but the deal turned out to be a real struggle to get away -- the order book never made it to 2 billion euros, resulting in just a 1.5 billion-euro issue. This is a potential problem for the EU's stability mechanism as between the EFSF and European Stability Mechanism plans are to raise 57 billion euros this year, up from 38.5 billion euros in 2016.

The path of least resistance is more pain for Europe, and it looks like that's what's happening. The EU's tribulations show little sign of easing, supply shows few signs of lightening up, and the European Central Bank will step down its QE purchases from an 80 billion euro monthly pace to 60 billion euros from April.

With spreads to Germany looking like they're set to head wider, normally you'd see countries back off from issuing new debt. But it looks like they're all coming now in order to get issuance out of the way in case yields rise further. That makes some sense, since it's hard to see what could shift sentiment back toward risk-on anytime soon. But what happened to an orderly queue?

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Marcus Ashworth in London at

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Jennifer Ryan at