The ECB Has Quietly Launched Yield Curve Control... Just Don't Call It Yield Curve Control

When the BOJ - that experiment guinea pig among "developed" central banks which now holds a record 133% of Japan's GDP on its balance sheet and which simply can't stop intervening or Japan's economy will implode in an instant - launched Yield Curve Control in late 2016, most market participants knew that it was just a matter of time before this particular experiment came to every other "developed" central bank. After all, the world's monetary experimentalists long ago found themselves permanently trapped by pushing yields to record low levels to enable a tsunami of debt by inflating a gigantic asset bubble and then hoping they can let some air out of the bubble occasionally, and let yields rise again, if ever so slowly in hopes of "renormalization." Alas as the recent events of late 2018 showed, in a world that has over $300 trillion in debt, higher yields - and renormalization - are now impossible, which is why central banks can never stop their micromanagement of capital markets and the economy, and why digital currencies are coming as the current fiat regime is now effectively defunct.

white ceramic piggy bank

Source: Unsplash

But first, it means that Japan's Yield Curve Control will be attempted across the world.

And while we wait for Jerome Powell to launch YCC in the US, which according to some may happen once the nascent inflationary spike pushes 10Y yields to 1.50% or higher threatening a crash in the bond market - and from there all other markets - it appears that the ECB has already launched a stealthy version of Yield Curve Control of its own, i.e., controlling and manipulating government bond yields which are only permitted to trade within a narrow range of parameters. Just two caveats: it's "different" from the BOJ version of YCC, and whatever you do, don't call it yield curve control.

According to Bloomberg, the ECB "is buying bonds to limit the differences between yields for the strongest and weakest economies in the eurozone, according to officials familiar with the matter, with one person saying the central bank has specific ideas on what spreads are appropriate."

In other words, yield curve control. But since the ECB does not want to be associated with the stigma that trails the BOJ which, as everyone knows, will be the first central banks to capitulate, the European incarnation of bond market nationalization is called yield spread control.

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