Bond Market Volatility: ECB Answers.

One of my Themes for 2015 has been that Central Bankers do not like volatility.

Volatility erodes confidence for those who participate in the economy: 

Consumers who are uncertain focus on savings and don't spend. Businesses postpone investing in growth activities until there is more certainty surrounding the future.

Recent Bond market activity, especially in the German bond market (but also in north American bond markets), has been quite volatile as bond investors  have become increasingly more concerned about building-in future inflation expectations in bond yields and prices.

In response, this morning the European Central Bank, through executive director Benoit Coeure, has announced that they will speed up their bond-buying operation (Quantitative Easing) in May and June. This has brought some buying back into bond markets as bond investor's fears of future inflation are brought back to more reasonable expectations.

In the UK, it was announced that inflation for April fell more than expected.

Meanwhile, last Friday's US economic data pointed to a less confident consumer and lower industrial production.

For the US Federal Reserve, a less confident consumer will be an important consideration when making the determination to begin to normalize interest rates in the US.