This asymmetry will drag down sovereign rates: the share of outstanding debt offering negative yield is growing fast.
By itself, the QE’s announcement had significant consequences on investment flows.
The analysis of data published by EPFR shows an acceleration in weekly flows toward funds, and the ETFs invested in the primary European asset classes of the universe of risky assets.
In the seven weeks that followed the ECB’s announcement, nearly €3.3bn was invested in IG funds – an average weekly inflow of €470m, versus an average of €95m in H1 2014 and €255m in H2 2014.
The European HY market analysis shows an even more marked rebound and an acceleration in demand for that asset class.
The ECB’s purchases will maintain appetite for credit, faced with the lasting weakness of sovereign rates. We expect a compression of spreads and of yields in the euro market.