Why does -v not work until after "}" in scripts?

[jidanni]

Why does -v not work until after "}" in this script?

# su - nobody
No directory, logging in with HOME=/
$ cat /tmp/o
{
    set -v
# NO STDERR
}
# YES STDERR
$ sh /tmp/o
# YES STDERR

bash:
  Installed: 4.2-4