Distortions feared in bond market due to ECB’s QE plan

Allianz SE chief economic adviser Mohamed El-Erian said on Wednesday the European Central Bank’s planned debt-buying program is causing market distortions.

The yield premium investors demand to hold Italian 10-year securities over equivalent German bunds will decrease in the short term, said El-Erian.

“You have to be a real outlier like Greece to not be pulled down by the lower rates in the high-quality bonds, but there’s a lot of resource misallocation going on at these levels,” El-Erian said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro.

The rate on Greece’s three-year notes rose 16 basis points to 14.06 percent on Wednesday as Athens auctioned six-month treasury bills.