European sovereign yields look set to drift lower in the near term, even as one more ECB hike may still be coming — that's the split emerging across recently published research.
On the tactical side, several analysts argue German Bund, French OAT, and UK Gilt yields are all being pulled lower by softer oil prices and weak macro data, with the move described as "led by the UK" and rippling into the eurozone core.
The structural counterpoint comes from a separate camp of researchers who see limited second-round inflation from subdued wages but still expect at least one more ECB hike before rates stabilise — with an outside risk of a higher terminal rate if oil rebounds. A related published view pinpoints the September ECB meeting as the likely timing for that final hike, followed by a hold and then cuts starting in 2028.
The two views aren't really in conflict — they operate on different horizons. Near-term, energy and data are disinflationary. Medium-term, a higher policy rate would eventually push sovereign yields back up.