European markets continue to make headlines with the euro hitting fresh lows for this economic cycle and a proportion of Eurozone sovereign bond yields dropping to levels never seen before. The European Central Bank (ECB) started its QE programme last week and their €60 billion monthly purchase plan has increased demand for eligible bonds. This demand seems to be pushing much of the euro area investable bond universe towards negative interest rates. Around 30% of Eurozone sovereign bonds already have negative yields - a marked increase from just August of last year, as seen in this week’s chart. Because the ECB is relatively insensitive to valuation measures, negative yields could be here to stay, suggesting a continuation of a weakening currency and high stock market valuations..
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