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FRANKFURT - European Central Bank policymakers consider a spike in Italy's bond yields to be justified by the government's projection of higher deficits, but see it as a warning sign that should cool talk of ending a bond-buying scheme early, six sources said.
That in turn has prompted some investors and analysts to speculate that the ECB may be forced to jump in to calm markets and avoid so-called fragmentation, where borrowing costs of one euro zone country fall out of sync with others. It has tweaked the rules of the scheme so that reinvestments can be skewed towards euro zone countries facing a disproportionate rise in borrowing costs - forming what ECB President Christine Lagarde has called the central bank's first line of defence in case of turbulence.
The ECB could easily afford to keep the issue on ice until at least next spring, when it should be clearer where inflation is going and whether the bank's historic tightening cycle has worked as intended, the sources said.
France Dernières Nouvelles, France Actualités
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