Macro-financial risk
2026-04-26
9 minute read
5 sources
ECB policy normalization in 2026: where the bond market breaks first
The ECB has stitched together a soft landing in headline terms, but the next stress will not arrive through the policy rate. It will arrive through a peripheral spread or an OAT auction that prices in political risk the staff projections do not.
By April 2026, the ECB has guided the deposit facility rate down to 2.25 percent, completed full APP runoff, and is well into the planned PEPP wind-down. TLTRO IV balances have largely amortized. The market reads this as orderly. Our reading of ECB SDW spread data, EBA Risk Dashboard sovereign exposure tables, and the political calendar i...