What the bond market sell-off means for the euro-zone

The bond market sell-off, and associated tightening of financial conditions, reinforces our view that the ECB has finished hiking. The market moves have been nowhere near big enough to prompt the ECB to intervene, but the level of yields does look concerning for Italy’s debt sustainability. Next week, the ECB will publish the account of September’s meeting, which should give more detail on the range of views about the interest rate outlook and perhaps QT.