European bond yields look set to keep climbing, according to a broad sweep of research published this week. Analysts point to three forces pushing German Bunds and Euribor swap rates higher: energy-driven inflation, expectations that the ECB tightens further, and heavier government borrowing.
Researchers argue that Middle East energy shocks feed into European inflation faster and harder than into US prices, sustaining pressure on yields as long as the conflict drags on. Bund yields have already hit their highest level since 2011, and the published consensus links that move to both ECB rate-hike bets and fiscal supply. August Eurozone inflation at 3.3% has reinforced those hike expectations heading into the next meeting.
On swaps, one strand of recent research sees the 10-year Euribor swap rate drifting toward 3.5% from roughly 3.3%, and the 30-year toward 3.6%, citing US yield spillovers and regional pressures. At the short end, German 2-year yields have pushed above 3%, though some analysts think that leg is close to exhaustion.