ECB holds steady but managers get the jitters

The European Central Bank remains resolute in providing aid to its nation members only when they ask for it, ECB's president Mario Draghi said on Thursday.

On the much anticipated Spanish bailout request Draghi said 'it is entirely up to Spain to take this decision' but reiterated that the ECB 'stands ready to act'.

Leaving interest and deposit rates unchanged with no sign the ECB is any nearer to intiating its bond-buying programme, investors remained distinctly cautious on euro area debt following the announcement.

Citywire Global caught up with bond managers just after the conference:

Mike Riddell, M&G International Sovereign Bond

'Investors have massively front run the ECB's next bout of liquidity and have all been buying peripheral eurozone debt in expectation of action. We're now in a situation where Spain won't ask for a bailout until yields rise substantially.'

'In my view it's just a matter of time until the market forces this upon Spain, and I therefore expect peripheral sovereign debt to perform badly, and in particular Spanish bonds.'

'The ECB doesn't seem to have got much closer to cutting the deposit rate, but I wouldn't rule this out in future. If the ECB makes noises about cutting the deposit rate, which could start to happen in the next few months, then German government bonds would be the main beneficiaries.'

'I continue to be positioned very heavily in German government bonds. In terms of currencies, the never-ending economic crisis and the potential for a rate cut means I'm positioned with only a negligible exposure to the euro.'

Chris Bullock, Henderson Euro Corporate Bond

'Mr Draghi has been fairly downbeat previously in his assessment of downside inflation risks, and the cut to growth forecasts is not a major surprise.'

'However given relatively stubborn current levels, inflation risks are still deemed to be in "balanced" territory, and the ECB will need to see more weakness before they cut rates further.'

'There is definitely potential of a further cut to the refinancing rate, and a narrowing of the rate corridor. A downward move in the deposit rate is perhaps less likely as the ECB will want to study the potential impact and transmission mechanism of negative deposit rates, an unchartered territory.'

A poll at Citywire's event in Berlin saw fund selectors vote in favour of Draghi's policies on Thursday.