Once upon a time, everyone was shocked when one after another central bank adopted what previously was unthinkable: a Zero Interest Rate Policy, or ZIRP. Then, on June 5, the ECB added "awe" to the equation when it became the first major central bank to push rates negative. The move was meant to shock depositors into pulling their money out of banks and into risk assets. It failed, which is why 2 days ago the ECB took awe to the next level when it added QE to NIRP. It did however succeed in one thing: pushing $1.4 trillion in Euro area government debt into negative interest rate territory and right into an abyss that screams deflation.

As JPM nots, the chart below shows an estimate of the amount of Euro area government bonds with longer than 1-year maturity trading at negative yields over time. Around €1.4tr of Euro area government bonds are currently trading with negative nominal yields, almost all of them of core euro governments of up to 5 years maturity. Back in June, before the ECB’s shift to negative depo rate, the amount of euro area government bonds with longer than 1- year maturity trading negative was virtually zero.

So yes: the ECB has failed to boost inflation in a controlled fashion, at least the type measured by seasonally-adjusted CPI metrics (if not by the price of hotdogs in Davos) for now and "controlled-fashion being the key word, because as Russell Napier warned this week, the next step in the process of fighting deflation is literally dropping money out of helicopters, one whose outcome on fiat money should be quite clear, and whose QE will further lead to an outright market collapse (as explained earlier), but it has certainly achieved one thing: sending 20% of Europe's universe of government bonds (according to JPM, the universe of government related securities of around €7 trillion) into negative territory.

The good news: there is still some 80% of Euro bonds that are still trading with positive coupons, if not for much longer.