European bond yields look set to stay elevated near-term, according to recently published research — though the consensus is far from unanimous.
Several research notes this week argue the ECB will keep a hawkish bias and leave at least one more rate hike on the table, citing lingering oil-price uncertainty and the need to manage inflation risk. That view supports an upward drift in Eurozone government bond yields. A related strand of analysis points out that markets are already pricing in at least a 25 basis point ECB hike on the back of energy-driven cost pressures, even where the analysts themselves are skeptical the move is justified.
A contrarian thread pushes the other way on the front end: some recently published work argues that normalising oil prices remove the main hawkish catalyst for the ECB, and sees Eurozone short-dated rates heading lower from here.
The real debate: has the oil pullback already defused the ECB's tightening impulse, or does enough inflation uncertainty remain to keep policy tight — or tighter?