“The amount of money in the Japanese government bond market that could leave Japan is monumental,” said Bob de Groot, a head trader at BNP Paribas. “We’ve just seen the tip of the iceberg so far.”[…]“We’ve see big Japanese flows into Europe recently, and particularly into French bonds,” said Demetrio Salorio, global head of debt capital markets at Société Générale.France’s 10-year bond yield fell to 1.71 per cent on Monday, a new record low and down from more than 2 per cent just a week ago. Austria’s benchmark borrowing costs also fell to an all-time low, while German, Dutch and Finnish bond yields were also close to their trough.But the biggest impact was in Europe’s debt ridden periphery as the yield on Italy’s 10-year benchmark fell 11bp to 4.31 per cent, while Spain’s fell 9bp to 4.71 per cent.
We’re glad that Japan’s dramatic monetary policy is providing some badly needed relief to Europe’s bond markets and buying the Eurozone some time. We’d be gladder still if we thought the Europeans would use the time to organize an orderly unwinding of the suicide pact that European monetary union has become. That’s unlikely; Europe remains unable to stop its slow, shambling, zombie-like shuffle toward the cliff.