The European Central Bank will release the accounts of its December monetary policy meeting this coming Thursday, and they'll be keenly watched for any sign of hawkishness.
In the past couple of weeks, there have been comments from various ECB officials suggesting that its asset-purchases program, which has been halved to €30 billion ($35.8 billion) a month, should cease altogether in September.
ECB President Mario Draghi has repeatedly said the central bank will not increase interest rates until well after its quantitative program is over. Ending it in September potentially brings forward the date when the eurozone's central bank could start to raise rates.
For the moment, euphoria is still the main feeling present in the markets. But there are signs the clouds are gathering on the horizon, at least for bonds.
The Frankfurt-based Sentix Institute published its monthly economic index on Monday, Jan. 8, and it shows a "broad and synchronous" upswing in investor sentiment. The poll was conducted among 929 investors, of which 244 are institutional investors, between Jan. 4 and Jan. 6.
The current situation economic index for the eurozone, which reflects investors' perception of the situation in the economy now, has risen to its highest level since August 2007. In that year, one month later, British bank Northern Rock collapsed -- one of the first signs in Europe that something was wrong with the financial system.
For other regions, the Sentix index is also in "boom" territory, with only Latin America showing an "upswing" -- in other words, the region is coming late to the party. In the U.S., investors' expectations have been buoyed by President Trump's tax reform, and this has pulled the Global Aggregate Index to its highest level since May 2006.
"The boom is not only being driven by catch-up effects in the eurozone, but above all by a very strong global economy," Manfred Huebner, managing director of the Sentix Institute, said.
But "such a strong and synchronous upswing inevitably raises the question of how long it will continue to develop without the typical signs of overheating," he added.
It is possible that the first such signs are beginning to show in the government bond markets. FactSet data show the yield curves in 10-year government bonds in eurozone countries -- from Germany to Italy and Portugal -- have shifted very slightly upwards compared with one month ago.
The supply of bonds is likely to increase as the economy keeps strengthening and demanding more capital. But, with oil prices increasing, it won't be long before inflation worries are back on officials' minds. Interest rates seem to have bottomed in the eurozone, too -- a new environment for investors is about to begin.
