European fixed income has been ‘normalising’ over 2025. Inflation is stabilising, the European Central Bank has halted rates near neutral, spreads are tight but markets are steady. Yet political and fiscal divergences remain sharp within the European Union with Italian BTPs now regularly pricing through French OATs. The EU’s rapid expansion as a AAA issuer is altering Europe’s credit market structure and raising the prospect of a genuine euro safe asset.
Jeremy Cunningham, investment director at Capital Group joins Conor Perry, economist at OMFIF to examine these developments. They discuss OAT-BTP repricing, investor-base effects on yield sensitivity, the impact of unified EU issuance and the outlook for 2026.
