Last week the ECB announced further measures to stimulate the European economy and promote higher inflation and employment. By lowering their two policy rates to the “lower bound,” and by announcing an asset purchase program, the ECB is following the Bank of England, Bank of Japan and the US Federal Reserve in exhausting all possible policy measures to achieve economic normalization. In addition, the ECB has set up a lending program, whereby European banks can access cheap loans from the ECB to use for consumer and business lending. The Euro plunged versus other global currencies on the news, and European sovereign bond yields fell. As we’ve discussed in past notes, low European bond yields are providing support to the Treasury market despite what has been bond unfriendly data as of late. For each of the three quantitative easing programs the Fed has embarked on, Treasury yields fell before the actual announcement and eventually rose during implementation. If similar price action ensues in Europe, another support for low Treasury yields may disappear, and the argument for higher rates strengthens.