Euro-zone bond yields may have already peaked

While we anticipate that the ECB will deliver more rate hikes this year, we don’t think that this would trigger another leg up in long-term euro-zone government bond yields. In fact, we suspect that yields will fall a bit over the rest of 2023, partly because we think that appetite for risk will diminish as growth falters in major economies. Among “peripheral” economies, we think that bonds in Greece and Portugal will continue to fare better than those in Italy and Spain, respectively.