So far the economic data out of Europe carries a message along the lines of "crisis averted" with the ZEW and Sentix economic confidence surveys turning up, and generally good data surprising against depressed expectations (Eurozone economic surprise index turning up). So it's only natural then that the attention starts to turn to the ECB's quantitative easing program that is due to finish in March 2017 - which consensus says will almost surely be extended in some form. Already people (including us) are starting to talk about when and how the ECB will taper QE...
Reports are that the ECB is already talking about taper - of course the timing of it could still be a long way off. But the fact is that the ECB is already tackling the challenge of finding enough bonds to buy, so you could say it's already starting to brush up against the limits of QE. At the same time inflation and inflation expectations appear to be stabilizing. Likewise the economic data has avoided a Brexit breakdown and is actually turning up, the next step may be for the above chart to actually show a breakout on the grey line of the downtrend that has prevailed over the previous year. If that were to occur then taper talk would ramp up and bond yields would do likewise. While a surprise taper announcement or taper hint could spook bond markets into a selloff, improving economic data can do just the same - and the turning of the lines in the graph above could be the start of that. So with the ECB meeting again next week, all eyes and ears will be tuning in for any taper talk, or an "Oktaperfest" if you would...
Bottom line: Beware of the threat of taper talk for global sovereign bond yields as European economic data takes an unexpected turn for the better.