European bond markets had a defining week: the ECB delivered a 25bp hike, lifted its inflation and growth projections, and signaled the tightening cycle isn't finished. Bund yields pushed to multi-year highs, with the 10Y touching levels not seen in 17 years.
Most published research read the meeting as hawkish. Analysts pointed to elevated energy prices tied to Middle East tensions, resilient euro-area growth, and Lagarde's framing of the hike as a "no-brainer" as reasons to expect more tightening. Several notes now pencil in additional 25bp moves in December and into early 2027, with terminal rate calls migrating toward 3.00–3.25%. One 10Y Bund yield target was lifted to 3.6% from 3.3%.
Not everyone agrees. A contrarian strand argued the intermediate Bund sell-off is overdone and that German rates should outperform US Treasuries as European drivers diverge. Separate work flagged rising long-end pressure from deteriorating public finances and AI-related capital demand, while credit was preferred over sovereigns. French OATs widened on fiscal concerns.