European bond yields look set to grind higher, and published research is nearly unanimous that the ECB will hike at its September meeting.
The core driver is energy. With Brent back above $100/barrel on Middle East tensions, researchers argue the full inflation pass-through hasn't hit yet — even after a softer June CPI. Several analysts note that some Governing Council members already pushed for an immediate hike, and one camp goes as far as saying it's "very hard to see" no move in September, pointing to firming business surveys and resilient growth. A contingent view adds that a second 25bp hike later in the year becomes likely if European gas prices stay elevated.
On longer maturities, the published consensus sees euro area 10-year yields drifting from 2.5% toward 3.1% by end-2026, with Bunds, OATs, and BTPs all rising on sticky inflation. One quantified estimate pegs 2-year euro swap rates as highly oil-sensitive — roughly 15bp higher for every $10 rise in Brent.
The nuance: ECB survey data suggests markets view September as near the peak, with cuts penciled in for 2027. Tighten now, ease later.