Mizuho EMEA Financial Research Hub

Mizuho EMEA maintains a consistently bearish outlook on global duration, driven by a widespread sell-off in sovereign rates and persistent inflation anxiety. A primary catalyst is an energy-induced inflation shock, with Brent oil spiking toward $120/bbl and showing record backwardation, which fuels expectations for further rate hikes from the BoE, ECB, and BoJ. UK Gilts are notably underperforming as political risk premiums rise due to leadership shifts and potential Labour party fragmentation, while JGBs are bear-steepening amid hawkish Bank of Japan commentary and fiscal spending expectations. In the US, technical support breaks and strong PPI data have pushed 10Y yields toward 4.60%, leaving Treasuries exposed to supply risks while the Fed remains on hold. High-conviction strategies include shorting EUR/USD and front-end SOFR and SONIA futures, as USDJPY basis spreads tighten significantly due to spot market moves. In the SSA sector, the European Union has completed 53% of its 2026 funding target, though significant upcoming redemptions for KFW and EFSF continue to shape supply dynamics. Overall, the research indicates that geopolitical tensions and shifting central bank paths are likely to sustain pressure on global risk sentiment.