As Danske Bank note this morning:
"Today will be the last day that ECB will be doing QE in the market as the ECB shut down for the holidays. Hence, there will be no buying until the markets open again after New Year, and thus there will not be support from ECB between X-mas and New year where there is usually modest liquidity, and we could see a wider BTPS-Bund spread"
With the ECB removing a sizeable pillar of support from European Govt Bonds, trading patterns could turn more erratic. Something that will only be exacerbated by the poor 'holiday markets' liquidity.
I don't expect possible German lockdown news to impact bond pricing much, given that many worst-case scenarios are already fully or partly priced in, but we must be aware of the potential for choppy trade.
For now though, Bund yields appear happy to remain rangebound and dormant.
