European government bond yields look set to grind higher, according to a cluster of recently published research — with German Bunds flagged as the clearest directional call in the region.
The argument runs on two reinforcing tracks. Analysts point to a sharp jump in German breakeven rates — the market's proxy for expected inflation — as a prolonged energy shock feeds through into prices. That's driving a repricing of European monetary policy expectations, with markets no longer betting on cuts and increasingly pricing in the risk of further hikes into year-end.
On the policy side, the published research consensus notes the ECB has signalled it remains open to another deposit rate increase at its September meeting, citing the still-unfolding impact of energy costs and extreme weather on inflation. One camp of analysts frames this as an explicit tightening bias that reinforces the inflation repricing already underway.
The takeaway from these views: structural inflation pressure and a central bank not done hiking point firmly toward higher European rates.