The EURO bond market gained 3.73% during the 1st quarter of 2012.

At the beginning of the year, the massive liquidity injection from the ECB started to take effect, and yields for Italian and Spanish money market instruments started to decline, since the new issues from the PIIGS countries, which suffered from recent weak demand, now sparked new interest. On January 13, the rating agency Standard & Poor's downgraded 9 out of 17 Euro nations. Austria and France lost their AAA rating. In February positive economic data continued in the U.S. In Europe, hopes rose that Greece could work out a deal with private creditors for a debt waiver and that the ruling parties in Greek would agree to the reforms requested by the Troika. The increase of the IFO Business Climate Index in Germany supported the expectations for positive first quarter developments of economic growth in Germany.

Economic data in the periphery developed less favorably. On February 29, In its second massive funding operation, the ECB pumped a significant amount of liquidity into the European banking system in the form of a 36-months tender. The banks grabbed 530 billion euros, much of which went to Spain, Italy, and France. At the beginning of March, uncertainty over the level of participation of private creditors in the haircut dominated headlines. Participation of 85.8% triggered a marked recovery in the markets. In the U.S., the labor market continued its upward trend, and early indicators depicted a slight increase over the previous month. In Germany, the IFO Index rose to an eight-month high and reflected the robust development of the German economy. In the U.S. market, participants anticipated a new round of bond purchases by the Fed.