Today is one of those special days for financial markets where we finally come to an event with so much hype that it's a big deal no matter how it goes down.  For example, the most dramatic thing the ECB could do today would be to make no policy changes.  In fact, given the level of anticipation, things would get downright crazy if we end the morning without a fairly substantial QE announcement.

In order to truly appreciate just how immense the anticipation is, one needn't look any further than a few select anecdotes from the timeline of the ECB's last bond buying program.

Sept 2012 - the "Outright Monetary Transactions" (OMT) program is announced.

Nov 2012 - before the program is ever used, a German coalition sued the ECB, claiming it violated German law and the Eurozone treaty. 

June 2013 - The German Constitutional Court holds its first hearing on the matter

February 2014 - The German Constitutional Court finally decided that OMT is indeed inconsistent with EU law, but they can't do anything about it themselves, so they refer the case to the highest court in Europe (ECJ, European Court of Justice)

October 2014 - The ECJ begins hearing the case, and we're left waiting for the preliminary opinion which was just issued last week.

INCIDENTALLY!  Remember mid October's crazy bond market movement?  So yeah... it turns out that ECJ hearing caused all that.  Well, maybe not all of it, but it was the catalyst.  Crazy right?  All those articles and talking heads on TV opining incessantly about this big, mysterious bond market flash crash, and all the while it was simply a massive positioning for ECB QE in the new year.

This is really good stuff!  I know of nothing on Netflix or Hulu that is as entertaining as the drama that unfolded after that mid-October flash crash.  Highly respected financial media publications tripped over their unmentionables in an attempt to dissect the root cause.  The venerable Financial Times had this hilariousness to add:

"When dawn broke on a grey October 15 in New York, traders and investors
had plenty of reasons to be nervous. Concerns over the spread of Ebola
and weakening economic activity in Europe and China were weighing
heavily – helping to push bond yields lower as investors sought the
refuge of US Treasuries."

Three swings, three misses.  And that was just the beginning.  By the end, that morning's Retail Sales report was one of the best guesses as to catalysts, and even some totally obscure stuff like a failed pharmaceutical acquisition (Abbvie?  who the heck is that?) got some credit.

No, no, no, and no...

You've heard of "sell in May and go away?"  This was "realize the year is prematurely over in October because the ECJ isn't going to produce any meaningful assessment of ECB QE until January."  

It's no coincidence that January rolled around and bond markets were off to the races again.  Market participants can hardly contain their anticipation of the ECB's announcement.  Speaking of things that aren't coincidences (and this is really the most important point in this entire diatribe), look at the day that yields bottomed out last week.  Are you looking at Wednesday the 14th?

Now guess when the European Court of Justice handed down their preliminary opinion on the legality of the ECB's last bond buying program?

See what I'm sayin'? 

The rumor has not only been bought, but it's been taken home, unpackaged, roughly handled, and thoroughly used.  If the ECB doesn't make with the cash today, things could get ugly.  They know this and so they will announce something.  The fun begins when that "something" isn't nearly as cut and dry as good old American quantitative easing.  Markets will then set about digesting the nuances, and I will set about keeping you up to date as that exciting process unfolds.  I leave you with Germany vs US 10yr yields, then and now.

Back when Germany first began challenging OMT

2015-1-21 bunds1

And everything since...

2015-1-21 bunds 2

Ha... good going Germany... Seriously!  Thanks for the low rates.

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Pricing as of 1/22/15 7:24AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Thursday, Jan 22
8:30 Initial Jobless Claims (k)* w/e 300 316
9:00 Monthly Home Price mm (%) Nov #IGNORE# 0.6