European bond yields look set to drift higher over the medium term, even as a short-term Bund rally is playing out right now. That's the picture emerging from recently published research on Eurozone rates.
On the tactical side, one strand of analysis points out that European yields have dropped to their lowest level since early March, with softer growth data and a pullback in oil prices doing the work. That move may have further to run in the near term.
Looking further out, the published consensus leans the other way. Researchers argue 10-year Eurozone government yields will stay elevated as inflation sits above target, governments keep issuing heavily, and institutional demand remains constrained. One concrete call from this camp: a further 25bp ECB deposit rate hike in Q3 2026, on the view that Eurozone inflation rebounds to 2.7% after an energy shock.
At the front end, some recent forecasts trim 2-year yield expectations slightly and flag that the ECB may skip a September move — implying Europe's tightening cycle stays shallower than the US one.