Will QE save Europe? - Real Time Insight
European 10-year bond yields dipped to new all-time lows in several countries today after Eurozone GDP was weaker than expected.
Eurozone GDP gained 0.2%, the same as the first quarter. But its largest economy, Germany, contracted in the quarter as GDP fell 0.2%, down from growth of 0.7% in Q1.
France isn't exactly picking up the slack, as its GDP was stagnate in the quarter. Combined, France and Germany make up 66% of the Eurozone's GDP output.
In response, France's Finance Minister Michel Sapin said that growth had broken down, both in Europe and in France. The sanctions with Russia aren't going to help matters in Q3 and Q4 either.
France has not seen the improvement that other countries have seen in recent years. Unemployment actually hit a new record high in June.
After today's disappointing GDP report, Sapin lowered France's 2014 GDP outlook to 0.5% from the 1% projection earlier this year.
The best performer of the larger economies was the UK, which saw a gain of 0.8%.
Record Low Yields
The 10-year German Bund briefly fell below 1% today to 0.998% for the first time in its history. Of the developed countries, only Japan has rates that low as its 10-year is trading around 0.5%.
The German 10-year started the year at 1.9%.
France's 10-year fell to 1.39% while Ireland hit a new low at 2.087%.
Investors even pushed the U.S. 10-year yield down under 2.4% to 2.38%, before it rebounded.
Immediately, some member countries, including France, called for the ECB to act.
Many are calling for a quantitative easing type of stimulus, similar to the QE programs in the United States and Japan.
Will QE save the Eurozone?