Researchers see one clear direction for European government bonds: yields grinding higher from here.
The published research view this week argues Eurozone sovereign yields have further to climb, with the ECB increasingly focused on inflation risks and a September rate hike now nearly fully priced in by markets.
The driver, analysts note, is energy. Oil is up roughly 30% and natural gas around 44% month-to-date, and that pass-through is forcing the ECB's hand. No move is expected at the immediate meeting, but one camp of analysts holds that markets are already so close to pricing a September hike that the anticipation alone is pushing yields up across the curve.
The broader case in recent research is that energy-driven inflation narrows the ECB's room to pause. As long as that pressure holds, the bearish setup for European sovereigns stays intact over the medium term.
For savers and borrowers across the eurozone, the takeaway from published work is straightforward: the cost of money likely isn't done rising.