European Central Bank president Mario Draghi sent the Euro up to its early June highs, or nearly, and European bond yields jumped. German 10-year yields rose by 6 bps, and (a little worrying) Italian yields rose by 7.5 bps. The spread between German and Italian 10-year government bonds remains well below its May peak of 201 bps, but yesterday’s EUR 17 billion Italian bank bailout at the expense of the Italian taxpayer underscored the fragility in Europe’s soft underbelly.

Draghi said in a nutshell that negative interest rates and aggressive asset purchases lowered borrowing costs, contributing to stronger consumer demand and overall GDP growth of 3.6% since January 2015, more than in the US during the same period.

In his words: “Converging financing conditions have in turn fed into rising domestic demand. According to our Bank Lending Survey, our latest easing phase has coincided with a strong rebound in demand for consumer credit to purchase durable goods, while demand for loans for fixed investment has gradually firmed. At the same time, falling borrowing costs have reduced interest payment burdens and facilitated deleveraging, which is one reason why, for virtually the first time since 1999, spending has been rising while indebtedness has been falling. This is a sign that the recovery may be becoming more sustainable.”