Market watchers hoping Draghi intervenes may be disappointed

 
Louisa Bojesen
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THURSDAY’S European Central Bank (ECB) meeting is widely expected to provide details on a new intervention programme. While the ECB’s head Mario Draghi announced a bond-buying programme in August, the market may be setting itself up for another disappointment. There’s a very big chance we’ll have to wait longer to hear the real details of how it works.

Some press reports have suggested the ECB is looking at buying bonds if yields move beyond a certain level. However, most economists I speak to don’t think the ECB would set a cap where it would step into the market.

As markets aren’t falling off a cliff, perhaps the ECB need not provide full-blown support at this stage.

SPANISH BONDS BACK ON THE TABLE
Spain will resume its bond auctions after a quiet August. Since late July we have seen a significant rally in Spanish bonds, especially in the shorter dated paper, on the notion that the ECB could step in and support the debt markets. According to Reuters, analysts think Madrid still needs to issue around €25bn (£19.8bn) worth of bonds in 2012. This is despite Spain announcing last week that it had covered around 73 per cent of the medium and long-term debt it wants to sell this year.

A SEMI-SUPPORTIVE ECB
A more likely scenario for Thursday might be a relaxation of collateral requirements. It is supportive, but not too supportive, and could serve to buy policy makers more time.

But if the Bundesbank continues objecting to ECB efforts, then how much the ECB steps in will depend on Draghi’s stomach for going up against Europe’s paymasters.

Louisa Bojesen is anchor of CNBC’s European Closing Bell.
Twitter: @louisabojesen