European Rates Weekly: Holding the line

Research evidence excerpt

European Rates Weekly: Holding the line

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30 Jul 2026 15:53:04 ET │ 19 pages

European Rates Weekly

Holding the line

CITI'S TAKE

Jamie Searle AC

This week: (1) Like Chair Warsh, Governor Bailey seems keen to hold. We +44-20-7986-9493

come out of the July BoE meeting with stronger conviction in receiving jamie.searle@citi.com

September MPC SONIA and wary of steepening risk for gilts over the coming

months. (2) In € spreads, we frame the persistent stickiness of Schatz in Andrea Appeddu AC

terms of both fundamentals and risk premia and argue that the curve should +39-02-8906-4316

continue being driven by the long end going forward. andrea.appeddu@citi.com

Jussi Harju, CFA ACBoE: hoping to hold — The Governor’s words, the benign domestic assessment, and

the BoE’s latest scenarios all reveal a strong preference to hold policy rates. We take +49-69-1366-5655

little signal from the growing hawkish dissent. Conflict uncertainty still makes jussi.harju@citi.com

fading hike premium one meeting at a time the best strategy. We come out of the AC Puja V Sawantmeeting with stronger conviction in receiving September MPC SONIA and wary of

steepening risk for gilts over the coming months. +91-22-4277-5155

puja.sawant@citi.com

Why are Schatz spreads so sticky — The stickiness of Schatz spread valuations over

Damilola Lanre-Ojothe last two years has mostly reflected the muted response of short-dated repo rates

to an ever-increasing stock of sovereign collateral to be financed. The +442079863918

responsiveness to higher sovereign fragmentation risk in the early phases of the damilola.lanreojo@citi.com

energy price shock suggests that front-end German paper still benefits from flight-

to-quality flows, but we argue that this channel has been structurally weakened.