Published research is leaning firmly toward higher European bond yields, with an increasingly hawkish ECB as the main catalyst — though the call hinges on the next round of inflation data.
Researchers point to persistent energy-driven inflation and hawkish ECB signals as the key forces lifting euro-area government bond yields into the back half of the year. One published forecast pencils in a 25bp ECB deposit rate hike in Q3 2026, taking the rate to 2.5%, driven by a euro-area inflation rebound toward 2.7%. A related view argues the ECB may end up more aggressive than the Fed, given sticky goods inflation and European gas pressure — a bearish setup for eurozone sovereigns heading into the September meeting.
Analysts add that with headline CPI already tracking near 3.3%, any upside surprise would push yields higher still, especially at the short end. A core CPI beat, one camp argues, would "certainly" strengthen the case for further hikes this year.
Short-dated rates are the pressure point: the German 2Y Bund yield has closed at its highest level since mid-2024.