On bond markets there is a progressive increase in government bond returns, both in the United States and in Europe, thanks to positive economic data, the increases in energy prices, the most restrictive monetary policies and the political decisions that have reduced some risks. A trend that will tend to diverge in the coming months, in response to the different prospects of central banks and expectations on interest rates. This is what emerges from an analysis by Florian Spate, Senior Bond Strategist of Generali Investments.
EI -expected stable or upright yields
For the next few weeks, the Core yields of the Eurozone is expected to establish, thanks to the summer seasonality and a possible reduction in interest rates by the ECB in September, favored by the drop in inflation and the economic growth under the potential.
According to Generali Investments analyst, however, the macroeconomic effects of the German tax stimulus and the commercial agreement between the EU and the USA could translate into a progressive increase in yields. “Although the expectations on medium -term interest rates are slightly overestimated – explains Spate – their impact on long -term returns has decreased thanks to the increase in the duration prize. The yield curve is distancing itself, with the nominal growth expectations that move from 2.5% to 4% by 2026, potentially leading to a significant increase in long -term returns”.
Easy government bond emissions
In this context, the emission activity of government bonds in the EU is proceeding successfully, with over 70% of the 2025 goal already achieved. Eurozone governments significantly reduced the share of long -term bonds in the new emissions, going from 43% in 2024 to less than 25% in the second quarter 2025, responding to the lower duration demand and facilitating the absorption of the offer. Although the primary market is still not very active in August, a good location of future emissions is expected even after the summer break.
Yield curve aimed down in the USA
Unlike the EU, US returns are expected to be oriented towards the reduction. The weaker economic data and the prospect of further cuts in the key rates of the Fed could in fact favor a moderate decrease in returns. But something more will be understood at the weekend, on the occasion of the symposium of Jackson Hole, the highlight of the summer and compass on the next moves of the Fed.
Although in July the Fed did not reduce the rates, the market still discounts at least two cuts this year and two more in 2026, but with a difference of only 36 basis points by the end of the year, lower than previous expectations of 50 points. The medium -term forecast on rates (OIS at 5 years and 3 months) is too high, about 3.75%. In the short term, yields are estimated on ten -year securities of 4.30% to 3 months and 4.05% at 12 months.
