Insight Investment's Harry Jones has highlighted in a report that the current market eagerness to price in interest rate hikes by the European Central Bank (ECB) this year is misguided. According to Jin10, Jones suggests that this miscalculation is creating trading opportunities in the eurozone bond market. Insight Investment anticipates that the ECB is more likely to maintain the deposit rate at 2% throughout 2026, with the first rate hike expected in 2027.
Jones, a portfolio manager, noted that although this is not their core expectation, the ECB has room for further rate cuts if necessary. However, he pointed out that Germany's large-scale fiscal stimulus measures should raise the threshold for rate cuts, potentially leading the ECB to keep rates unchanged. He added that Insight Investment will continue to closely monitor the short end of the euro yield curve to capitalize on emerging opportunities.