EGBS: HSBC Wary Of Further Steepening Pressure In 2026

HSBC note that “steeper curves have been a familiar theme for sovereign bond markets this year. A lot is priced in, but we highlight four factors that could drive Eurozone curves even steeper in 2026. We see most scope for steepening in the long end of the German curve, with potential for more spread compression for the periphery”.

• The four factors they focus on are:
• All-time highs in issuance driven by the German fiscal expansion.
• A general shortening of issuance WAM excluding Germany.
• Changes to the ECB’s quantitative tightening scheme are not imminent.
• Reform of the Dutch pension fund system providing less support for the long end and potential rotation of demand towards higher yielding securities.