European Rate Markets: Eurobonds, by-elections and the spring statement
J.P. Morgan's podcast on Eurobonds and UK rate markets suggests a nuanced view: while Eurobond issuance could pressure core European rates, the UK's fiscal discipline post-by-election may limit gilt underperformance. The desk seems to align with a modest bear steepening in EUR swaps and a flattening in GBP swaps, with the Spring Statement seen as a non-event for rates.
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.
How firms align with this view
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.
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.
Risks to this view
Upside risk if Eurobond issuance accelerates; downside if UK fiscal metrics deteriorate unexpectedly.
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 only.
Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-5220641-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2026 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P.
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