"The Norway 2017 government bond has spiked up to 109. Also see Swiss Gov. Quite extraordinary. The only reason I can think of is that European bond funds, whose remit is to remain within the economic area, have bid it up attempting to exit Euro exposure. Probably a sell don't you think?"

Eoin Treacy's view Thank you for raising this interesting question. Last week saw demand for perceived 'safe havens' soar. The US Dollar, Japanese Yen, US Treasuries and gold all rallied impressively. At least in part due to the Eurocentric focus of the crisis, Norwegian and Swiss bonds also accelerated higher. Some of these 'safe haven' trades are now coming under pressure in the aftermath of the EU's massive rescue package.

Today's action on the Greek, Irish, Spanish, Portuguese and Italian bond markets suggest that either the ECB is already a purchaser of these bonds or fear that it is has initiated short covering. Such a dramatic drop in yields has burnt a lot of bears and suggests shorting these sovereigns will be a riskier trade from now on because of the increased likelihood of government intervention.

Norway raised interest rates by 0.25% last week to 2% in continued efforts to normalise policy. The Euro remains in a downtrend against the Krone and continues to fall back to test the lower side of the 2005-2008 range. While the Euro rallied somewhat last week, it encountered resistance near NOK8 today and a sustained move above that level would be required to question the consistency of the medium-term decline.

As you point out, the price for the 4.25% 2017 accelerated last week and yields have fallen from 3.5% to around 2.75% today. Considering the size of the move that has already taken place, at least some consolidation of recent gains appears likely. A break of the Euro's downtrend against the Krone would deprive investors in Norwegian assets of a tailwind and could speed such a consolidation of recent sovereign debt market gains.

The Swiss 2.35% 2020 accelerated to 106 on Friday but pulled back sharply today and a sustained move to new rally highs would be required to question scope for some further downside.