Hows the Euro QE going?

Well, I am sure the prime ministers of Italy and Spain have slowed their bond sales dramatically until the ECB money arrives, hence bond yields have dropped to record lows. But they have a long wait:

ADMISI's Marc Ostwald: Last but not least, the expanded programme does not start until March 15, so "Mr Market" now has a very long waiting period to sit on holdings of EUR debt before selling to the ECB, and with plenty of event risk in the world, starting with the Greek election, and to mention the prospect of an imminent Ukrainian default. Sort this under an uncomfortably long period before the QE 'party' gets started.

The dollar is up, so the US Fed can expect additional deflation in the next few months. But most of the Euro price change has already passed:

LONDON, Jan 22 (Reuters) - The euro held fast more than a cent above 11-year lows ahead of a European Central Bank policy meeting on Thursday widely expected to embark on the outright money-printing the bank has steadfastly avoided, in contrast to its peers.
Traders and strategists at the major banks say an extended monthly bond-buying programme, outlined by Reuters and other news services on Wednesday, is fully priced-in to the euro.
That argues for a clearing out of many of the bets on the euro weakening against the dollar that have made money for investors over the past six months and the single currency rose almost a cent on Wednesday.

The central banks of Spain and Italy will remit their QE earnings back to their respective governments, so they get to deduct expenses from their taxpayers and the effective yield for their governments drops to the cost of banker salaries.

The Euro bond market will segment as Italy and Spain first sell what they can into the ECB QE and hold off on purchases from the open market. This is an effective tax on the Euro bond market.

The German government is running a surplus, so they are stuck.  What do they do with the extra money? Who knows.



Here is a US Reaction:

U.S. Commerce Secretary Penny Pritzker said the impact of a rising dollar on exports and economic growth bears monitoring.

Asked at the World Economic Forum’s annual meeting in Davos, Switzerland, whether a climbing greenback could drag down U.S. trade and economic expansion, Pritzker said “it’s a factor and something to keep an eye on.”
The dollar has gained about 16 percent against the euro and 13 percent versus the yen in the past year as the U.S. economy has gained momentum even as the global economy has slowed. Delegates to the Davos conference including Goldman Sachs Group Inc. President Gary Cohn and Carlyle Group LP co-founder David Rubenstein have said its rise could soon weigh on the U.S. economy.

Everything is in transition. But the net result should be a lot less banking in the Euro and a lot more banking in the Swiss franc. The Swiss problem is expanding their currency business.