European rate markets leaned hawkish this week, with research broadly converging on the view that the ECB has more tightening to do before any pivot.
Multiple research notes flagged that markets are still pricing another ECB hike by autumn, reinforced by Chief Economist Philip Lane suggesting the neutral rate may have drifted up to around 2.5%, and by Pierre Wunsch leaving the door open to a second move. One forecast track sees German Bund 10Y yields climbing toward 3.1% by end-2026, with French and Italian 10Ys following the same path as inflation lingers above target. A more constructive case was also made for euro front-end breakevens, with energy and ceasefire fragility seen as underpriced risks.
In credit, analysts pointed to strong inflows into euro IG funds (+4.2% of AuM since April) as supportive of further spread tightening, with a flurry of switch trades favoring utilities and select financials over weaker names.
Late in the week, attention shifted to UK political risk, which researchers warned could drag global yields higher.