(Bloomberg) -- Now that the European Central Bank is the main reason most investors give for holding some of the euro area’s bonds, there’s a lot riding on Thursday’s decision.

Anything less than a 500-billion-euro ($556 billion) boost the pandemic emergency bond buying fund will probably disappoint markets. If the ECB obliges, or surprises with a bigger increase, then Italian bonds, which are poised for the best May since 2003 because of the central bank’s backstop, may rally.

Some analysts also expect the ECB to tweak its tiering system, which was first introduced in September to help lenders cope with the pain of negative interest rates. The system exempts as much as six times the minimum amount of reserves a bank is required to hold from paying the deposit rate of minus 0.5%.

“The time is right for the ECB to adjust its tiering system,” Frederik Ducrozet, strategist at Banque Pictet & CIE wrote in a client note, adding that raising the multiple to eight times “could engineer a net transfer of several billion euros to the banking sector.”

If it comes to pass, German banks will be the biggest beneficiaries, because they have the euro zone’s largest reserves, and banking stocks in the bloc will likely rise.

The ECB will set policy on Thursday, followed by a press conference with President Christine Lagarde.

Debt Sales

Euro-area bond sales are set to dip next week with offerings from Germany, France, Spain and Austria totaling around 21 billion euros, compared with 31 billion euros in the five days through May 29, according to Commerzbank AG. French offerings, which include a new 10-year note, are set to comprise half of that.

The bank says the “door is open” for syndicated sales, but expects such a German 30-year offering to take place the following week given calendar considerations and the ECB rate decision.

  • There are no redemptions to be paid but Italy pays coupons totaling around 1.4 billion euros next week
  • The U.K. will offer around 11 billion pounds ($13.6 billion) of debt across four sales next week and the BOE will maintain its bond-buying program across nine operations at a pace of 1.5 billion pounds per maturity bucket
  • Data for the coming week in the euro area, Germany and U.K. is mostly relegated to second-tier, backward-looking figures.
    • April producer prices alongside the unemployment rates for the euro area are due on Wednesday, while April retail sales Thursday may be overshadowed by the central bank rate decision
  • DBRS Ltd. reviews Germany’s sovereign rating on Friday

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