UBS House View - Daily Europe

Latest edition · August 28, 2026

Daily Europe en 1665649

UBS views elevated long-term bond yields as a structural repricing driven by fiscal deficits, Fed uncertainty, and tech AI capex debt issuance rather than solely inflation risks. The CIO recommends focusing on short- to intermediate-maturity fixed income, broadening equity allocations to cyclicals like European banks, and holding commodities for diversification.

Despite a recent drop in yields and oil prices, UBS argues that structural pressures—including Fed policy uncertainty under Chair Kevin Warsh, extensive tech corporate borrowing to fund AI capex, and expanding government deficits—will keep long-term borrowing costs high, raising the 30-year US Treasury yield forecast to 4.9% by March 2027. Consequently, UBS prefers short- and intermediate-maturity debt over extending duration. Equity markets remain supported by earnings broadening, with European banks rated Attractive on accelerating credit growth and strong profitability, while Tokyo inflation data points toward further Bank of Japan rate hikes up to 1.75% next year.

Key takeaways from the latest edition

• 1.Structural forces including Fed communication uncertainty, heavy tech AI corporate debt issuance, and persistent fiscal deficits are keeping long-term yields elevated despite recent short-term pullbacks.
• 2.Fixed income strategy favors short- to intermediate-maturity high-quality government and corporate bonds over aggressive long-duration exposure.
• 3.European banks are rated Attractive due to accelerating Eurozone loan growth, stable interest rates, resilient margins, solid dividend yields (~5%), and low valuations (~11x 2027 P/E).

What this series covers

• From the studio
• Thought of the day
• What to watch: 28 August
• Caught our attention
• Market update
• Global asset class preferences definitions
• Appendix

Edition archive

• Daily Europe en 1665649

  August 28, 2026

• Daily Europe en 1665600

  August 27, 2026

• Daily Europe en 1664926

  August 17, 2026