E-Z yields likely to rise only gradually despite PEPP recalibration

The ECB announced a reduction in the pace of its asset purchases today, but both its forward guidance and its updated economic projections still suggest that the Bank will keep monetary policy very accommodative for a long time to come. We continue to expect that while 10-year government bond yields in the euro-zone will rise somewhat as the economy recovers, continued accommodative monetary policy will mean that they do so only very gradually.