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08.28.2026

Taking stock of our EGB strategic views

We turn strategically POSITIVE on Bunds, as current real yields price in most growth/supply risks, breakeven should be near their tops, and falling inflation should allow 1–2 ECB cuts in H2 2027. Within EGBs, we are UNDERWEIGHT OATs given persistent fiscal/political risks, while we are OVERWEIGHT SPGBs on strong Spanish growth and easier fiscal discipline. We remain strategically NEUTRAL on BTPs with a positive outlook, supported by Bunds, but are more cautious than on SPGBs given upcoming Italian electoral risks.

We switch to a POSITIVE strategic stance on Bunds (from NEUTRAL with a positive outlook previously ), for the following reasons:

1) At current levels, Bund real yields have priced in all the positive news regarding growth and most of the increase in supply pressure expected going forward (mainly from Germany).

2) Our baseline view is that energy prices have reached their peak, and this should cap any additional increase in breakeven rates.

3) We expect EA inflation to decline to target in 2027, with the ECB delivering one to two rate cuts in H2 to reverse some of the monetary policy restriction implemented during 2026 .

Within EGBs, we see OATs as the riskiest bet from a medium-term perspective and would consequently underweight them within an EGB portfolio. Despite the fact that they have recently underperformed the rest of the EGB market, we Expect the substantial fiscal and political risks to weigh further in the medium-term.

We would position ourselves OVERWEIGHT on SPGBs. Spain will remain one of the fastest growing econom ies in the EA in 2027, with growth expected to average 1.9%, making fiscal discipline a much easier political objective to achieve.

Strategically, we remain NEUTRAL on BTPs, with a positive outlook, supported by our constructive view on Bunds. Within EGBs, however, we remain somewhat more cautious on BTPs than on SPGBs, as the upcoming electoral cycle could introduce some downside risks.

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Chiara Cremonesi
Senior Rates Strategist

Mattia Banin
Junior Macro Analyst


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