The Bundesbank released its data for Target2 claims during September and these show a significant fall from €751.5bn in August to €695.5bn. Their claims are back to May levels. Based on external sources of data available so far, the flows seem to have gone to Spain and Italy which saw a large drop in their negative balances. This is clearly a positive, bullish sign for periphery (bonds).

There are also positive signs from the Greek bond market with yields returning to their immediate post-PSI levels. This will help Greek banks in their repos with BoG (they ‘ll be able to maintain a given amount of lending with less collateral) as well as Greek pension funds.