DAVOS, January 22, 2026 — A surprising lull in transatlantic tensions is giving European bond markets a lift. A perceived easing of pressure from former U.S. President Trump regarding Greenland, observed at the World Economic Forum in Davos, is contributing to improved investor sentiment and pushing euro rates higher.
Euro Rates Climb as Risk Sentiment Improves
Market confidence is rebounding, particularly benefiting euro-denominated bonds.
- Investor sentiment is recovering, driven in part by a less confrontational stance on the Greenland issue.
- The 10-year swap rate has risen to 2.9%, though remains below its recent peak of 2.96%.
- Continued supply pressures and a positive growth outlook in the eurozone are supporting higher rates in 2026.
- A steeper 5s10s curve is anticipated as investors demand greater yield for longer-term holdings.
The 10-year swap rate is currently at 2.9%, a move upwards, but still trailing its earlier high of 2.96%. Meanwhile, the eurozone’s economic growth is showing signs of improvement, bolstering the case for increased rates throughout 2026, especially considering the ongoing high supply of bonds.
What does this mean for bond investors? A steeper 5s10s curve—the difference in yield between 10-year and 5-year bonds—is likely to emerge this year. This spread reflects the “term premium,” the extra return investors require for holding longer-dated securities. Both quantitative tightening and increased government borrowing are expected to contribute to this premium.
Supply Pressures and Growth Fuel Further Rate Increases
Thursday’s Economic Calendar
Today’s key economic releases are slated to come from the U.S., including reports on and . The Fed’s preferred inflation gauge, the , will also be released. A consensus estimate of 0.2% monthly growth would be viewed favorably. Weekly jobless claims and the final 3Q figure are also on the docket. Across the eurozone, the European Central Bank will publish the minutes from its December meeting.
In the primary markets, France is auctioning short- to medium-term bonds, alongside inflation-linked bonds, totaling over €15 billion. The U.S. Treasury will also be selling US$21 billion in new 10-year TIPS.
