ECB may need more than promises to contain spreads

The prospect of tighter monetary policy in the euro-zone has raised the threat of a bigger sell-off in the region’s bond markets. If this happens, we think the ECB would ultimately intervene to prevent any lasting damage. But we doubt that it will agree the details of a new QE programme until it is urgently needed and, as a result, we think the euro-zone bond market is vulnerable to a sharp sell-off.