European short-term interest rates look set to keep climbing, according to a growing body of published research on the euro area.
Several strands of recent analysis converge on a hawkish near-term European Central Bank. One camp of researchers argues the 2-year euro swap rate is biased higher, while others expect the ECB to lift its deposit rate again as soon as September. The reasoning is broadly shared: higher oil prices are feeding second-round inflation effects, and the euro-area growth picture is firming enough to give policymakers cover. Market pricing already leans that way — interest rate curves are embedding roughly 44 basis points of additional ECB tightening by year-end, with a September move nearly fully priced. One published view frames the current policy rate as still only around neutral, leaving room to go further.
The picture flips for European high-yield bonds. A contrarian thread of recent research suggests the asset class will underperform its US counterpart, citing a softer macro backdrop and unfavorable sector mix as reasons to stay underweight.