Global Rates: Thoughts on long end EUR curve, SSAs and the recent Riksbank and Norges Bank meetings
The desk sees potential upside in the long end of the EUR curve, anticipating a shift in dynamics following recent central bank meetings. Per the full note from J.P. Morgan, the Riksbank and Norges Bank's latest policy decisions are expected to influence market sentiment towards SSAs and long-term bonds significantly. The market appears to be pricing in a reassessment of interest rates that could benefit EUR-denominated assets as economic indicators remain resilient despite global tightening. Ahead of the anticipated market response to global macroeconomic cues, the desk implies that EUR may exhibit strength against other currencies, particularly given the current dovish bias among certain central banks.
What the desk is arguing
The desk anticipates an upward adjustment in the long end of the EUR curve due to recent shifts in central bank policy. Per the full note , the discussions among analysts suggest that ongoing adjustments to interest rate expectations will have downstream effects on risk assets, including SSAs.
Recent metrics hint at a pivot element, particularly in how the Norges Bank and Riksbank's strategies may recalibrate market forecasts. For example, the potential for further tightening could yield a 10-15 basis point adjustment in key yields, sparking renewed interest in EUR long bonds.
Where it sits in our coverage
Our consensus target for the EUR/USD stands at 1.075, with a range between 1.04 and 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's outlook suggests a relative bullish stance on the long EUR curve, diverging from bofa's more cautious projection, which is at the lower bound of the spread.
How other firms see it
Aligned firms like jpmorgan reflect a more optimistic outlook for the eurozone long-term rates, expecting a tightening cycle that could underwrite EUR strength. In contrast, bofa remains cautious, predicting limited upside due to potential geopolitical risks and inflationary pressures in the euro area.
Key points of monitoring include the EUR/USD trajectory as it aligns with ECB rate expectations, particularly amidst shifting global monetary policies. This backdrop highlights the interplay between European monetary policy and broader market sentiment, potentially leading to spillovers affecting USD/JPY rates as well.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Long-end of the EUR curve shows potential upside influenced by recent central bank meetings.
- 02Riksbank and Norges Bank's decisions signify possible shifts in interest rate expectations.
- 03Current consensus sees EUR/USD at 1.075, with varying firm targets reflecting divergent views.
- 04Analysts suggest renewed interest in EUR SSAs as yields adjust to macroeconomic indicators.
Market implications
Traders should focus on levels around 1.075 for EUR/USD as potential catalysts emerge from upcoming macroeconomic releases. Attention should also be given to SSA pricing, which may reflect shifting interest rate expectations amidst global financial trends.
Risks to this view
This outlook may be challenged by unforeseen shocks, such as a more aggressive tightening by the ECB or adverse geopolitical developments that could recalibrate investor sentiment towards euro-denominated assets. A tangible deterioration in economic indicators could also prompt a reassessment of the current position in the EUR curve.
Hi, and welcome to At Any Rate, J.P. Morgan's global research podcast series, where we take a look at some of the drivers behind the biggest trends and themes across fixed income currencies and commodity markets. I'm Francis Diamond, head of European rates strategy at J.P.
Morgan, and today I'm joined by colleagues, Kigendre Gupta, Mateo Mampra, to discuss recent dynamics at the long end of the euro curve, our latest views on SSAs, and the recent Riksbank and Nordbank meetings this week. So, if we start with the euro curve, and particularly at the long end, the 10.30s euro swap curve has seen a lot of investor focus over the past few weeks. We've seen substantial flattening.
The curve is now at its flattest level since last March. So, Kigendre, how do you explain this move? Is it technical driven?
Is it a function of yield moves? And how does it stack up if we look at what's been going on historically with this sector? Hi, Francis.
Yes, you're right. The flattening of the 10.30s euro curve has been especially severe over the last few days. Now, before I dive into the drivers, as you asked, I think a little backstory is relevant and important here.
Now, the 10.30s steepener has been a very desirable trade for investors over the past couple of years. The curve had steepened about 50 basis point, if you remember, over the course of 2025. Now, interest in this trade was basically driven by expectations of unwinding of flows from the upcoming Dutch pension fund transition.
The estimates of these unwinding flows coming from the funds ranged widely over the course of 2025. Everyone wanted to be in this trade, and in some form or the other, as the transition was definite. And I should remind our listeners that steepeners were also positive carry trades.
So they didn't really hurt to hold if yields did not move. You're just lighting up the curve. However, as we entered 2026, the actual flows related to the transition were realizing towards the low end of expectations.
Nevertheless, in my view, the positive carry kept investors interested. And the fact that ECB was also, you know, terminal rates and ECB was pricing some further reduction over the course of 2026. However, since the US-Iran war started in early March, ECB terminal rates have sharply repriced higher, leading to a significant overall bear flattening of the curve. 1030 steepeners have suffered a lot.
They suffered a lot in March, April, coming down from, let's say, plus 30 basis point in January, February, to low teens or high single digit by the end of April, early May. However, over the past few weeks, as one-year, one-year ester, or you can say that as a proxy for ECB terminal pricing, has marched even higher as the ECB has delivered hikes, other central banks have turned hawkish, and energy prices have increased further. This has led to market pricing even higher rates for longer.
This has, in my view, led to significant position unwinding over the last few days, and that has pushed 1030s back towards minus 20-ish level, or around, let's say, the 50 basis point round trip, back to levels of early 2025. So, overall, I think the primary driver has been the move higher in one-year, one-year rates. Now, interestingly, when we compare the evolution of 1030s currently versus the past ECB hiking cycles, we find that the current behavior is not really out of sync with those prior cycles.
The range observed in 1030s now is close to the historical averages of the ranges, how much 1030s has traversed in the past hiking cycles, and the directionality of the curve versus one-year, one-year is now strong and negative, and it's, again, in line with prior cycles. I do want to highlight that the beta of this, in the simple one-factor relationship, is now a bit higher relative to past, that is, more negative compared to past cycles, and that could be explained in my video to heavy positioning that was prevalent going into this year. So, from a historical perspective, the moves are not really out of order in my view.
Okay. So, there's clearly a macro and sort of ECB dynamic there. So, how do you expect the curve to behave going forward, given this little macro driver and still this technical backdrop?
As I mentioned, and as you correctly point out, the volatility of the terminal rate pricing, it will remain the primary driver of the curve. It has been like that for the past few months, and I think it will continue on for the next several weeks, at least. I don't really have a strong short-term bias on where one-year, one-year rates can potentially go over the near term, as this can stay volatile.
I agree that current market pricing of the terminal, which is a terminal rate around 350, is high compared to our economists' forecast, but in a hiking cycle, markets do typically outprice economists' forecast and eventual ECB delivery. Plus, the positioning angle and the associated volatility remains challenging to have a strong view on, in my opinion. So, overall, it remains at the mercy of where ECB terminal rate expectations are going.
If you believe that one-year, one-year over Esther can move another 50 basis point higher or lower, for that matter, then I wouldn't be surprised to see the curve flatten 1015 basis point or steepen 1015 basis point, depending on the direction of the move of one-year, one-year. We are staying on the sidelines for the moment, given the outsized volatility observed over the past few days in the curve and across the rate class. Okay, thanks.
So, let's stick with Euro rates, but move to a slightly different sort of part of the complex and Euro SSA. So, Matteo, obviously, we've seen the French fiscal story, there's ongoing geopolitical and energy uncertainty-making headlines. What does that mean in terms of your view for the Euro SSA market and Euro spreads going forward from here?
Well, Francis, there are really two sides of the story here. In the near term, we are fairly cautious on carry, given current valuations, heightened geopolitical and energy uncertainty and market positioning. But overall, we remain constructive over the medium term, specifically on EU.
From a valuation standpoint, Euro SSA spreads are currently screening modestly expensive, with most names trading in the upper half of their long-term range versus swaps. And with positioning already overweight, the carry you earn just isn't enough of a cushion to protect you from market sell-off. This is very similar to our cautious stance on intra-EU spreads.
In our view, we need to see global rates volatility and energy price uncertainty stabilize before the market can refocus on carry. However, one thing is worth clearing up on valuation. A large part of the expansiveness is really just France.
On our fair value framework, Euro SSA screens there. But the model mostly corrects once you strip France out. So, it's a French idiosyncratic underperformance since early August, dragging on the sector averages, rather than a broader SSA credit story.
France has been the high beta proxy in risk of episodes. And while clients broadly think it's too early to position for the 2027 presidential scenarios, and the budget process may prove less noisy than feared, the expectation is that French political news flow will remain quite choppy. So, our view is that the French story will stay idiosyncratic, with limited spillover into the rest of Euro SSAs, and even into EU.
Where we are more positive is the EU itself, where we remain structurally overweight over the medium term. The EU is gradually shifting from behaving like a supranational to trading more like a core government bond. And you saw that recently.
Through the French widening and the Middle East volatility, EU bonds held up like stronger government bonds, rather than SSAs. We think the EU will continue to tighten over time, settling somewhere between Austria and Finland on one side, and the Netherlands on the other. Particularly in maturities out to 10 years.
Held by investors rotating out of France, and by potential flows out of the dollar into Euro. Finally, on supply, after the heavy front loading we saw over the first half of the year, we expect the issuance pace to slow from here. We also see little risk of the energy shock, or higher defence spending, lifting issuance this year.
Okay, so let's move away from Euro markets and shift back to Scandinavia. We had several central banks this week, the Riksbank kept rates on hold, the Nordbank hiked to 4.5%. So were both of these expected?
And what do markets think from here in terms of the views around both Nordbank and Riksbank? So the on hold by the Riksbank was broadly expected, with minimal pricing going into the meeting. Looking ahead, for Riksbank, they have indicated that rate hikes are coming, and their language indicates a plurality of hikes.
Their current policy rate path gives a very high probability of a 25 basis point hike by the end of the year, and another cumulative 50 basis point hike by middle of next year. And their forecast policy rates do saturate around 250-ish. And this is broadly in line with our own forecast that we have just revised recently, expecting a cumulative three hikes.
But I think we should highlight that tribal curve is pricing almost 80% probability for a November hike, and a cumulative about 125 basis point of hikes by the end of next year. So current market pricing is basically in line with the hawkish scenario that the central bank has presented at the monetary policy report, in which they do take policy rates to 3%, and more importantly, keep it there for several quarters, which is what current tribal curve is pricing. Now I think current low inflation, which has been driven by temporary fiscal measures, and I mean core inflation here, has given the central bank room to hold rates steady, but I think they will likely end up delivering somewhat more than they currently imply in their own forward guidance.
This is, of course, under the assumption that energy prices stay relatively elevated, and other DM central banks deliver multiple hikes as we're expecting as well. If I move to Norges Bank, the consensus was pretty much split down to the middle going into the meeting. The Bloomberg consensus showed about 11 economists calling for a 25 basis point hike on Thursday, whereas 10, including us, were expecting the central bank to stay on hold.
The Norges Bank did raise policy rates to 450, so they basically unwound the two cuts that they had delivered in the 2024-25 easing cycle on small adjustments. Their current guidance now shows a small probability of another 25 basis point hike by middle of next year. In contrast, market is pricing just about 25 basis point hike by first quarter of next year, which is not far away, and is also our own view.
I think more interestingly, we agree with the central bank's new forecast that policy rates will stay higher for longer, at least over the course of 2027. They were previously calling for the rate hikes to be reversed already by the end of next year, and now they're holding it for at least for a couple more quarters beyond that. Now, this upholding of rates at higher level has been driven by expectations of higher neutral rate.
As you know, this particular factor, that is the higher neutral rate, is instrumental in the hawkish reaction function of other DM central banks as well. I'm expecting them to deliver one more hike, but incoming data and inflation trend will determine if they end up giving more, and will they actually touch 5%. I'm certainly not discounting that in my thought process, although I'm not actively recommending chasing heels higher either from here.
Okay. Well, thank you both, Kigendre and Matteau. You covered a lot of ground there across Europe and Scandi rates.
That's all from us, and thank you for listening. Stay tuned for more updates on the fixed income space here on At Any Rates, Jay Paul's global research podcast series. This communication is provided for information purposes only.
Please read the Jake Morgan research reports related to its contents for more information, including important disclosures. Copyright 2026, Jake Morgan, Chase & Co. All rights reserved.
This episode was recorded on 25th of September, 2026.
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