Published research this week points to upward pressure on euro area sovereign yields, with the French-German bond spread expected to widen further as bets on more ECB rate hikes intensify.
Several research desks note markets are now pricing nearly four additional ECB hikes over the next year, driven by hawkish signals from officials like Isabel Schnabel and a likely September inflation bump from energy prices. A contrarian view argues the ECB could even deliver back-to-back hikes at the October meeting, with solid growth data keeping that option live.
The clearest divide is France vs. Germany. Multiple analysts flag widening French spreads on fiscal and political worries — one estimate suggests France would need a 3–4 point improvement in its primary balance to stabilize its debt ratio, viewed as politically unrealistic. In contrast, German Bunds are expected by some to outperform peers thanks to fiscal strength and central bank orthodoxy.
A more constructive medium-term view also exists: some researchers see EU-level bonds behaving increasingly like core government debt, with spreads tightening over time.