European bond markets face broad upward pressure on yields, with published research pointing to higher Bund yields and materially wider intra-European spreads through Q4 2026 and beyond.
Researchers argue the structural driver is large European fiscal needs colliding with constrained central bank demand. One camp of analysts expects two further 25bp ECB hikes, taking the deposit rate to 3%, and sees long-term EUR government yields staying elevated until at least H2 2027 as restrictive policy and sticky inflation compound debt worries. A contrarian cyclical note from recent research flags renewed energy pressures and firmer-than-expected September inflation as risks that could force forecasts higher still.
The spread story is arguably more acute than the yield story. The published consensus sees France-Germany 10Y spreads widening further on fiscal fragility and pre-election uncertainty, with one target at 150bp and the 30Y OAT-Bund already near 152bp. Italy-Germany spreads are also flagged as vulnerable given fiscal strain and no central bank backstop.