Eurozone Medium-, Long-Term Rates Seen Relatively Unchanged

Wall Street Journal

25-04-2025

0604 GMT – Danske Bank Research expects relatively unchanged medium- and long-term rates in the eurozone, but potentially with quite large fluctuations, says Frederik Romedahl in a note. Fluctuations should be subject to political noise and uncertainty related to the economic consequences of the tariff policy, the chief analyst says. Interest-rate cuts by the European Central Bank point to lower yields at the short end of the curve, while long-term government bond yields face the greatest upward risk, he says. At the long end of the curve, 'the term premium, more than for swap rates, is sensitive to military build-up in Europe and the significant debt financing the process will require.' ([e-mail])
0554 GMT – Societe Generale Research is cautious about French government bonds, or OATs, amid political stress and fiscal uncertainty, says strategist Mathias Kpade in a note. 'Political risk and fiscal fragility persist,' he says. 'French politics remain stressed, with no clear fiscal path.' Societe Generale Research, therefore, recommends investors short OATs if the yield spread between 10-year OATs and German Bunds falls below 70 basis points. The 10-year OAT-Bund yield spread closed at 72 basis points on Thursday, according to Tradeweb. ([e-mail])