Further glimmers of hope

Last week’s developments bolstered hopes that the euro-zone has finally reached a “turning point”. Indeed, given the further falls in peripheral government bond yields, some optimists even questioned whether the ECB will actually need to use its Outright Monetary Transactions (OMT) programme to purchase peripheral bonds. Nonetheless, September could yet prove to be another false dawn if the recent progress is not backed up by additional steps. And even if euro-zone policymakers agree on further substantive measures soon, we still think that Greece’s bail-out will probably collapse, resulting in it leaving the euro-zone.