The ECB is reportedly considering a new bond-buying scheme to cap yields/spreads in the battle against fragmentation, according to Reuters sources. And in order to go ahead with that and avoid a contradictory move (where it has to raise borrowing costs in the euro area as a whole while limiting that for some of the periphery members), the central bank is believed to be considering pairing the scheme with 'sterilisation’ – as they did a decade ago.
This would see the ECB hold auctions so banks can park cash at the central bank for a more favourable interest rate, with sources noting that it could be up to the refinancing operation rate. This would see cash drained from the financial system in order to offset the bond purchases to cap the yields/spreads i.e. 'sterilisation’.