Euro rates researchers leaned decisively hawkish this week, with most published views pointing to higher yields near-term and at least one more ECB hike priced in.
Analysts flagged that markets are pricing a September ECB hike at over 80%, supported by upside growth surprises, sticky core inflation, and limited pushback from officials. The 2Y euro swap rate sat near 2.95%, notably above where it traded when oil was last at similar levels — a sign markets expect higher-for-longer policy. One medium-term forecast has euro area 10Y yields drifting from 2.5% toward 3.4% by late 2026, with the German 10Y Bund holding just above 3.10% on elevated real rates.
Beyond cyclical drivers, one thread argued climate shocks — droughts, heat, extreme rainfall — will lift food inflation unevenly across the bloc, widening sovereign spreads. A separate structural view pushed back: once second-round effects prove limited, 2027 could bring meaningfully lower rates and a bullish steepening as the ECB pauses.