Published research this week points to broad upward pressure on European sovereign yields and ECB policy rates, with the consensus looking for higher Bund and euro area yields, and further ECB tightening into late 2026 and early 2027.
Analysts note eurozone 10-year sovereign yields have climbed to levels last seen in 2008. One camp attributes the move mainly to higher real yields — not inflation expectations — driven by ECB normalisation, geopolitical shocks, and energy prices. The published consensus expects at least one more 25bp ECB deposit rate hike in December 2026, with some recently published views flagging a further move in Q1 2027 as euro area inflation is projected to stay above 2.5% through 2027.
Views largely align on direction but differ on degree. One base case pencils in a hike to 2.75% in December followed by a pause; another sees up to 100bp of additional tightening. Researchers argue market pricing near 3.25% by April 2027 looks aggressive. Peripheral spreads, notably, remain contained.
A differentiated thread links rising US long-term yields — partly fueled by AI-related corporate bond issuance — to upward pressure on Bunds via global capital flows.