Armored Wolf: Without QE, We may Have Seen Double Digit Deflation

Italian, Spanish 5 year credit default swaps (CDS)

Italian five-year credit default swaps (CDS) tightened 0.19% in April while Spanish five-year CDS tightened 0.15% from 1.05% to 0.90%, even though both counties still face serious economic difficulties. Spain still has a lot of external debt and employment growth is partially due to falling wages, creating another hurdle down the road. Italy is still in recession and has official unemployment of 12.7%, with some unofficial estimates going even higher.

ECB authority and Ukrainian volatility impact yields

“The tightening of CDS spreads, I believe is therefore driven by three factors,” writes John Brynjolfsson in the Armored Wolf LLC April letter...