If the ECB is deliberately trying to prove how little efficacy it still may hold, they are doing an excellent job at it. There has been nothing but QE, QE and more QE in Europe since the New Year, which in the past might have at least courted some significant positive thoughts. If you recall back in September, at the “definitive” “stimulus” of a further negative deposit rate, accompanied by details of the long-referred ABS and covered bond initiatives, credit markets across the continent were at least mildly impressed if only termporarily. Yield curves, if they could be called as such, briefly interrupted their bearish mangling to take almost two weeks toward a more pleasant, and thus optimistic, stand.

There is nothing of even a small reprieve over the coming expectations for ECB QE; not even a minor blip in the “right” direction. Instead, European credit is even more distorted than at the start of the year despite the already-incredulous proportioning in December of what are really dead regimes. These are not yield curves by any fundamental reasoning, instead existing as some mutated form of a monetary “tool” gone so far.

ABOOK Jan 2015 Europe BundsABOOK Jan 2015 Europe Swiss

I am wholly unconvinced this is all related to Greece’s mess, but even setting aside whether that is a primary factor you have to appreciate that credit markets are possibly more upset by a Greek disruption than any positive motion supposedly created by QE initiation. And it’s not even close, except in terms of the calendar: the ECB meets on January 22 and the Greek election is only three days later.

ABOOK Jan 2015 Europe CHF

The Swiss, the franc being the safety bid, but not just Greek safety, implemented a deposit charge on December 18 which held off the franc for less than two weeks. The franc is now back at its most appreciated place since the peg was introduced more than two years ago. Again, I don’t think that is just Greece or even mostly Greece, as the flattening (there needs to be another term for what is taking place here, “flattening” just isn’t dynamic enough or of the right magnitude) of the yield curve in Switzerland is far more longer-term than just any 2011 rerun in 2015.

Like US credit markets, these financial indications running contrary to what respective central banks want and want to see (of them and of their economies) are simply a greater discount on future “success.” The more jumbled and distorted the European curves become, the less concession they give for the abilities of monetarism. In a longer-term sense that may turn out to be a good thing, as this third bubble turn really does not need a fourth. The orthodox textbook wants to call it “deflation”, but it really is simply justified suspicion that none of it works in the affirmative, and may in fact be quite harmful for even shortened exposure.