In December 2021 the ECB President, Christine Lagarde, said EU inflation was a “passing hump.” Her actual quote was, “I see an inflation profile that looks like a hump…and a hump eventually declines.” We think Ms. Lagarde to be quite elegant; nonetheless, with a quote like that she appeared to be doing her best Jay Powell / Janet Yellen impersonation. All of world’s Central Bankers are straight out of Central Casting – same earnest demeanor, same dour countenance, same smug haughtiness, and same reluctance to admit a mistake. To wit, just 10 days ago Ms. Lagarde “rejected calls for the ECB to act faster on inflation.” Plus ca change, indeed.
Ms. Lagarde, just like Jam Master Jay before her (Ms. Yellen, however, continues to tell the “noble lie”), refuses to look at the data or she, again like Jam Master Jay, doesn’t grocery shop or fill up her car. Here are some of the data Ms. Lagarde continues to ignore: Germany’s December 2021 PPI figure was +5% vs. November 2021 and +24% vs. December 2020; Denmark’s December 2021 PPI was +4% vs. November 2021 and +33% vs. December 2020; France’s December 2021 PPI was +1% vs. November 2021 and +18% vs. December 2020; Italy’s PPI was +1% vs. November 2021 and +28% vs. December 2020; and Spain’s PPI was +4% vs. November 2021 and +36% vs. December 2020.
Like US bond investors, European bond investors also know what’s up and they continue to diss and dismiss the ECB. This morning the 10-year yields for France, Germany, and the UK moved to their highest levels in almost 3 years. The Swiss 10-year yield moved to its highest level since autumn 2018 and indexed PIIGS (Portugal, Ireland, Italy, Greece, and Spain) yields are also breaking out. All will go higher.
German 10 Year Yield – Monthly – Target 1%
France 10 Year Yield – Monthly – Target 2%
Italy 10 Year Yield – Monthly – Target 4%
Switzerland 10 Year Yield – Monthly – Target 1%
And, to make it even harder on the world’s central banks the 10-year JGB yield moved to its highest level since early 2016 or when the BOJ introduced its negative rate policy.
Japan 10 Year Yield – Monthly – Target .50%
