Markets are forward looking

So, 8 days ago, nine days ago, we had the announcement that the ECB would lend at 1% to any bank that could come up with even vaguely acceptable collateral.

And yes, eurozone sovereign debt would be most welcome collateral, why do you ask? Thus an attempt at a solution could be seen. Get the banks stuck into the greatest carry trade ever and she\’ll be right.

However, this doesn\’t actually start until the New Year. Yet bond yields have already been falling.

Global funds are gobbling up Spanish and Italian debt on bets that lenders will exploit the European Central Bank\’s offer of three-year credit at 1pc to buy sovereign debt, playing the \”carry trade\” on the yield spread.

Quite, markets are forward looking. Doesn\’t mean they\’re always right, heavens no, just that they do try to anticipate the future.

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