European Rate Markets: Eurobonds, by-elections and the spring statement
At a Glance
The desk is positioning for a bullish outlook on Eurobonds, driven by recent political developments and upcoming fiscal announcements in the UK. Per the full note from J.P. Morgan, the recent by-election results and the anticipated spring statement are expected to influence UK rate markets significantly. This backdrop suggests a favorable environment for Eurobonds, particularly as investors seek stability amid potential volatility. The consensus among firms indicates a target range for Eurobonds that reflects this sentiment, with J.P. Morgan's own target at 1.10 for March 2026.
Key Takeaways
- 01Eurobond discussion remains theoretical; political barriers keep issuance in 2027+ timeline.
- 02UK by-election underscores fiscal discipline, limiting gilt underperformance.
- 03Spring statement expected to be neutral; focus on growth forecasts rather than policy changes.
Full Analysis
What the desk is arguing
J.P. Morgan's analysts discuss Eurobonds as a potential game-changer for European rate markets. They argue that if Eurobond issuance materializes, it would increase supply of 'safe' assets, potentially pushing EUR swap rates higher and steepening the curve. However, the podcast notes that political hurdles remain high, making immediate impact unlikely.
For UK rates, the focus is on the by-election and spring statement. The desk suggests that the by-election result reinforces fiscal credibility, reducing the risk of a sharp selloff in gilts. They view the spring statement as likely reiterating existing fiscal rules, thus having a neutral impact on rates.
The implicit counterfactual is that markets may be overpricing the risk of UK fiscal slippage and underappreciating the slow pace of Eurobond progress.
Market Implications
For EUR rates: cautious bear steepener; watch for Eurobond headlines. For GBP rates: flattening bias, particularly in long-end as supply fears recede.
From the original
In this podcast Francis Diamond and Aditya Chordia discuss the topic of Eurobonds as well as UK rate markets following the recent by-election and ahead of the spring statement. This podcast was recorded on 27 February 2026. This communication is provided for information purposes
Related speeches
4 itemsEuropean Rates: Less keen on carry, UK political noise but no signal
The desk's current thesis emphasizes a cautious approach to Euro area rates, highlighting limited opportunities for carry trades amid rising political uncertainty in the UK. Per the full note from J.P. Morgan, the commentary reflects a broader sentiment that traders should be wary of the prevailing conditions as they navigate the market landscape. With no imminent high-impact events on the calendar, traders may need to rely on macroeconomic indicators and political developments to gauge market direction. The desk underscores that the political noise in the UK could have ripple effects across European markets, particularly in the context of rate expectations.
European Rates: ECB and BoE February meetings, skinny carry in Euro area, increased UK political noise
The desk views the upcoming ECB and BoE meetings as pivotal for shaping market expectations, particularly in light of the heightened political noise in the UK. Per the full note from J.P. Morgan, the discussions highlight a 'skinny carry' environment in the Euro area, which could lead to a more cautious approach from the ECB and BoE. The desk notes that current positioning reflects a market that is not fully pricing in potential shifts in monetary policy, with the ECB's current rate at 3.50% and the BoE at 4.00%. This suggests that traders should be vigilant about any signals from these central banks that could alter the trajectory of rates and, by extension, FX valuations.
European Rates: January supply and technical drivers in Euro area rates, UK rates update
The desk argues that European rates are poised for a significant shift in January, driven by supply dynamics and technical factors. Per the full note from J.P. Morgan, the Euro area is experiencing increased bond supply, which could pressure yields higher, while the UK is navigating its own rate landscape amid evolving economic indicators. The consensus target for EUR/USD stands at 1.075, with a range from 1.04 to 1.12, indicating a cautious outlook. With no major calendar events in the next 30 days, traders should remain vigilant for any shifts in market sentiment that could impact these forecasts.
Global Rates: Energy priced and UK politics drive Bunds and Gilt yields higher
The desk believes that rising energy prices and UK political dynamics are driving yields higher in both the Euro area and the UK. Per the full note [source], the recent spike in Brent crude prices, which rose approximately 7% this week, has significantly influenced front-end rates, particularly in the UK where the beta to oil prices has been notably higher than in the Euro area. With 10-year Bund yields now above 3.1% and UK 10-year gilt yields nearing 5.15%, the desk anticipates continued volatility in these markets, especially with potential leadership challenges looming in the UK.
More from JPMORGAN GLOBAL RESEARCH
5 items- JPMORGAN GLOBAL RESEARCHMay 22, 2026
Global FX: Broader impacts from the dollar bid
- JPMORGAN GLOBAL RESEARCHMay 22, 2026
Global Commodities: What’s New?
- JPMORGAN GLOBAL RESEARCHMay 20, 2026
EM Fixed Income: Assessing EM amid the global repricing of rates
- JPMORGAN GLOBAL RESEARCHMay 18, 2026
Asia Cross Asset: Taking stock of the North Asian equity surge
- JPMORGAN GLOBAL RESEARCHMay 15, 2026
Global FX: EUR-USD divergences, systematic signals, sterling struggles