Euro Rates in the Geopolitical, US and Monetary Policy Mix

Research evidence excerpt

Euro Rates in the Geopolitical, US and Monetary Policy Mix

Idea

July 17, 2026 02:53 PM GMT

Morgan Stanley & Co. International plc+MEuro Area Rates Strategy | Europe Luca Salford

Strategist

Euro Rates in the Geopolitical, Luca.Salford@morganstanley.comMaria Chiara Russo +44 20 7677-1337

Maria.Chiara.Russo@morganstanley.com +44 20 7677-3499

US and Monetary Policy Mix Jasper Knyphausen

Jasper.Knyphausen@morganstanley.com +44 20 7425-2185

Rates markets continue to be shaped by developments in the

Middle East, US macro data and central bank communication. In

EGBs, the persistence of geopolitical uncertainty leaves us

cautious on the scope for further Italy tightening in the near

term.

Key Takeaways

Rates markets continue to be driven by developments in the Middle East, US

macro developments and central bank commentary.

We expect investors’ attention to turn to next week’s ECB meeting, where they

are likely to look for signals in the press conference and subsequent

communication.

We continue to struggle with a tightening cycle beyond early 2027 and therefore

retain a preference for flatteners.

In EGBs, we think another week of geopolitical tension leaves limited scope for

additional Italy tightening in the short term.

Special focus: We look at the performance of the 10s30s Italy-Germany box. Our

analysis suggests a "cyclical" auction cycle when analysing data since 2019.

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