Rates as of 0500 GMT

Market Recap
Well, I was wrong about the European Central Bank ECB meeting. I was even wrong about President Lagardes scarf! she didnt wear one this time. They did take a concrete step to deal with higher bond yields, namely they announced that purchases under their Pandemic Emergency Purchase Programme PEPP would take place at a significantly higher pace through to the end of Q2 than so far in 2021 EUR 53bn in Jan, EUR 60bn in Feb.

They left open the question of how much significantly higher is. It would be reasonable to guess maybe EUR 10bn to EUR 20bn a month, or EUR 30bn EUR 60bn a quarter. Combined with an anticipated decrease in the net supply of bonds from EUR 255bn in Q1 to EUR 170bn in Q2, or EUR 85bn, this would lead to a major rebalancing of supplydemand, cutting the net supply by around half. That would probably result in significantly lower yields.

Yields on Eurozone bonds had already been turning down. The move accelerated yesterday.

While accelerating PEPP purchases, the ECB also left the overall amount in the PEPP unchanged. This implies that theyre going to be able to slow their bond purchases later. Indeed, President Lagarde said in the press conference that the balance of risks is more balanced than they were before, and thats without taking into account the impact of the US fiscal support package, which as the OECD noted will have large spillover effects to the global economy. There are a host of other reasons why they are…