The ECB is on a collision course with bond supply

The ECB isn't expected to do anything at its meeting on Thursday but Mario Draghi will be grilled about bond supply, or the lack thereof.

The ECB's rules make it increasingly difficult to find bonds to buy. Reuters reports today that roughly 55% of German bonds are ineligible for QE programs because they yield less than the deposit rate.

One option would be to lower the deposit rate, thus making more bonds eligible. Tweaking rules this week would also free up more supply.

Here is one idea that Reuters said is unlikely.

"A change in the allocation of bond purchases away from the size of a country's economy towards one that is more in line with outstanding debt is seen benefiting southern Europe.

It is controversial because it implies the ECB holding bonds from more heavily-indebted countries. Sources close to the ECB have told Reuters that the bank is not considering such a move."