European bond markets spent the week repricing for an ECB back in tightening mode, with September now seen as near-certain for a hike.
Multiple research notes pointed to markets pricing roughly a 90% probability of a 25bp ECB hike in September, lifting the deposit rate toward 2.5%, as Eurozone inflation reaccelerated on firmer energy prices and stronger-than-expected Q2 GDP prints out of Spain and Germany. President Lagarde's hawkish tone reinforced the view that tightening isn't finished.
That shift showed up across the curve. Analysts flagged the 10Y EUR swap settling around a 3.2% handle, with one published projection seeing Bund 10Y yields climbing toward 3.4% by mid-2026 and Italian BTPs peaking near 3.2% on fiscal-sustainability concerns. Peripheral spreads widened into the data.
Not everyone is bearish duration: one strand of research argued Bunds now look attractive as a haven versus Gilts, and a separate note favored adding Eurozone sovereign duration on weak growth prospects — a minority view against a broadly hawkish week.