Thursday, June 4, 2015

ECB Draghi's Jeopardy answer - "get used to it"




Everyone knows the routine for playing the game Jeopardy. You pick a category and the host reads  an answer and you have to provide the question.

We can play the game with the category "financial markets".  ECB president Draghi's - "get used to it"is the answer. Our response as a question will be "What is higher volatility and lower liquidity in European bond markets?"

There is over 60 billion in euros spent every month as part of the ECB's QE program and yet the market reaction is more uncertainty with a lack of liquidity. It is hard to say that bonds are the safe asset of Europe and the spill-over is hitting all global bond markets. This volatility and lower liquidity is changing the complexion of bond markets. Traders are coming back to what used to be a sleepy area for many in the post-crisis period because directions are less clear. Uncertainty leads to opportunities.

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