The note further explained that an extension to the QE programme that is less than 6 months would be seen as a hawkish outcome resulting in a steeper curve and higher yields.
"Meanwhile a nine-month extension or longer would lead to a flatter curve unless a significant change in the modality of the QE programme is made," the note said.
However, analysts have warned that an extension of QE programme will add further pressure on European bank profitability that arecurrently already bearing the brunt of negative interest rates.
"Poor profitability, lackluster loan growth and uncertain capital rules threaten the effectiveness of the euro zone monetary transmission mechanism, forcing deposit rates lower and credit costs higher. We remain cautious on the outlook for European bank profitability, with our views detailed within," the UBS report said.
European banks have seen their stocks fall to all-time lows due to a number of factors such as uncertainty surrounding the U.K.'s vote to leave the European Union, weak earnings reports and low interest rate across the globe.
"European banks face three long-term headwinds that have impacted their performance over a period of time. These include the Banking Resolution and Recovery Directive, negative interest rates and non-performing loans," Dhaval Joshi, senior vice-president at BCA Research told CNBC via email earlier this week.