After Friday's action in stocks and commodities on the news of expanded intervention by the ECB, investors should not be blamed for entertaining the thought that progress had been made on a solution to the European crisis. Well no more than one trading day later in what cannot be perceived as a positive sign, we see the yield on the German 3 month bond drop all the way down to zero. Here are the yields on the short end of the German curve:
We are not 100% certain of the accuracy of the 3 month print but so far we haven't seen anything which would cause us to doubt the data.
At the beginning of June we saw the yield on the German 2 year briefly go negative so which is another recent incident of extreme behavior in the German bond market. Another sign that the data appears to be accurate is that yields fell across the German curve today.
Germany equities were up in today's session with the benchmark DAX gaining 1.2% and so we see yet again differing opinions between stock and bond investors on the current state of things. In another example of a schizophrenic market, Greek equities gained slightly while the Cypriot stock market, which usually maintains a high level of correlation with Greece, had a big down day sliding 4.8%. Over in commodities, Brent was up half a percent with WTI dropping close to a percent. Today's behavior seems indicative of a market still
attempting to digest the announcement from Friday.
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