On March 10, ECB president Mario Draghi pulled out his bazooka and fired what was supposed the be a shock and awe blast of QE that would sink bond yields and the euro.

Instead the euro rallied along with yields on European bonds. Traders front ran the the announcement and the trade is unwinding.

European bonds had their worst month since August.

Bloomberg reports ECB QE Boost Can't Save Euro Bonds From Worst Month Since August.

The first month of the European Central Bank's expanded stimulus program has done little to aid the region's government bonds.

Even as the ECB increased its asset-purchase program to 80 billion euros ($92 billion) in April, from 60 billion euros, sovereign securities headed for their biggest monthly decline since August, according to Bloomberg World Bond Indexes.

"The whole notion of the ECB stepping up their purchases in April and May has already been front run," said Martin van Vliet, senior interest-rate strategist at ING Groep NV in Amsterdam.

Euro-region government securities handed investors a loss of 1 percent this month through Thursday, the Bloomberg Eurozone Sovereign Bond Index shows. U.S. Treasuries dropped 0.3 percent, while Japanese bonds returned 0.9 percent.

The five-year, five-year forward inflation-swap rate, which ECB President Mario Draghi has cited in the past to justify monetary easing, climbed to 1.47 percent Friday, the highest closing level in almost seven weeks, as Brent crude futures touched the most since Nov. 4.

Shock and Aw Shucks Revisited

Actually, the announcement fizzled immediately.

I said so on March 10 in Draghi's "Shock and Awe" campaign morphs into "Shock and Aw Shucks"

Draghi's plan worked for all of 15 minutes. The market then had second thoughts on the Euro, on gold, on the German stock market, and on equities in general.

Aw Shucks on the Euro

Aw Shucks on Gold

Euro Daily Chart

Draghi was hoping the euro would sink to boost inflation and help exports. Instead, after a brief intraday selloff, the euro rallied and it has continued along that path.

What Happened?

Clearly the trade was front run, but there is a bit more to it than that.

Draghi has simply run out of room to cut rates further into negative territory. It has to do with mortgages and bank losses.

For the full explanation, please see Is There a Limit to Draghi's Negative Interest Rate Madness?