Status: Draft -- Not PublishedWill be live at 11/04/2021 07:30
Global Macro Views: The End of the Great Fiscal Illusion
- Over the summer we wrote extensively about the great “fiscal illusion,” …
- whereby low sovereign bond yields were seen as signaling ample fiscal space.
- We showed that low bond yields were misleading, distorted by central bank QE, …
- especially on the Euro periphery where ECB QE absorbed 100 percent of issuance, …
- even as foreign investors used ECB QE to sell their holdings of Italian and Greek bonds.
- Among the G10 central banks, the ECB faces the biggest hurdles to normalizing policy, …
- given that an end to QE could see periphery yields rise sharply on weak demand.
