Rates are waiting. Just like boats

EUR rates - Recap of the week: A volatile, headline-driven week, with oil and Middle East developments continuing to dictate market direction. While a few episodes of relief, linked to tentative negotiation signals or weaker macro data, briefly supported bonds, these moves proved short-lived and failed to alter the broader trend. Euro rates ultimately moved higher over the week, with a clear bear flattening dynamic. The repricing was concentrated at the front end, reflecting renewed pressure on ECB expectations. Further out the curve, moves were more contained. The macro mix is starting to evolve at the margin, with early signs of growth weakness emerging in Europe, but inflation and central banks remain the dominant drivers.Tactical view: We remain neutral on duration at current levels. We are slightly more confident that OATs will outperform BTPs in the short term and underperform them in the long term. The yield curve steepening theme is struggling to gain traction, and we attribute this to increased skepticism amongst bond investors regarding growth.Insights of the week: EUR Inflation: “premium now, normalisation later”