European bond research is leaning hawkish near-term, but the long end is where the real debate sits.
The published research consensus expects at least one more 25bp ECB deposit rate hike, taking the rate to 2.50%, with Eurozone inflation rebounding toward 2.7% and energy costs still feeding through. Some strategists argue a September move has become more likely, noting that short-dated Euro rates are especially sensitive to oil shocks.
On the long end, one camp of analysts flags Germany's 2027 draft budget — borrowing up 12.5% year-over-year and a projected deficit of 4.3% of GDP — as a structural push higher for Bund yields through heavier issuance. Others point to a counterweight: European life insurers and pension funds have posted their largest debt purchases in nine years, which researchers argue should put a floor under 30Y Bund prices.
A contrarian thread of recent research goes further, favoring European duration and expecting Bund yields to fall if oil stays contained and ECB hawkishness fades against a weak growth backdrop.