“As I have written many times this year, this is not an investment strategy, but a job preservation strategy," writes Marc Ostwald of Monument Securities of the extraordinary move lower in EU periphery bond yields. "If these guys resist and bemoan poor credit quality, they will underperform their peers ... In the long run this is the road to the next crisis and ruination.”
While the sovereign 10-year yields of Ireland and Spain have fallen below that of the U.S. (and Italy is close), they're still well above the 1.33% of Germany, so European fund managers can goose performance by continuing to buy the PIGS. Dancing while the music plays is ICAP's Phil Tyson: “I think that the bond market could go higher in the short term as the search for yield continues in an environment where ECB rate expectations are anchored with forward guidance having been strengthened."