The impact of ECB making the existing QE programme more expansive on Bund yields, should be through the reflationary effect, especially if risky asset and oil prices stabilise/move higher and this should put upward pressure on longer Bund yields.

The other channel should be through any potential supply/demand mismatch effect resulting from the ECB's QE expansion, which could potentially put downward pressure on yields. 

When QE was first announced in January this year, it was the supply/demand mismatch impact that dominated the price action initially and pushed Bund yields sharply lower towards 0bp. 

With a few months delay, the reflationary impact of QE together with poor Bund market liquidity pushed yields sharply higher. The reason for the delay in the reflationary impact of QE in Europe compared to QE announcements elsewhere was mainly because very few investors expected such a bold programme from the ECB in the first place.

"The supply/demand mismatch might be relevant again for a couple of reasons. The ECB ownership levels of the eligible QE universe of EGBs (Germany, France, Italy and Spain) currently as well as in September 16 (the current expected end date of QE) are much lower than for Covered bonds (CBs) and Supras. There are already notable liquidity issues in these latter markets due to the levels of current and forecast ECB participation", says Barclays.