European sovereign bond yields look set to grind higher, according to the bulk of published research this week — with peripheral spreads, especially Italy and Belgium, at particular risk of widening.
The core argument from analysts: geopolitical tension and stickier energy prices are baking inflation pressure into euro-area yields, while the ECB under President Lagarde is expected to keep tightening, with another deposit rate hike flagged for September if inflation data cooperate. Strategic forecasts circulating in the research consensus see 10-year euro-area yields drifting from around 2.5% toward 3.2% by end-2026.
On spreads, one camp of analysts is explicitly cautious on Italian BTPs and Belgian OLOs versus Bunds, citing energy vulnerability and a messy Italian autumn budget. A separate note flags that if Japanese pension funds rotate out of foreign bonds, Austria, Belgium, Spain, Italy and France would feel it most.
The one dissent: a contrarian tactical view argues Bunds have already sold off enough that risk/reward now favors going long duration for the next few months — a timing call, not a rejection of the longer-term rising-yield thesis.