Can the ECB Keep Going?

Markets are taking the ECB’s promise of 18 months’ worth of consistent QE related bond purchases at face value but through its actions the ECB risks creating a highly damaging speculative boom and bust in the Euro Zone debt markets; massive and potentially expensive distortions to the term structure of European interest rates; a collapse in profits in the banking sector; and even further strains on the TARGET2 intra-regional settlement system that could try Germany’s patience even further.  The ECB’s version of QE is ill-conceived and we suspect nowhere near as sustainable as markets currently believe.  Full report available on request.