Finance
Big European investors bet against swings in ECB, bank of England rate expectations
Published by Global Banking & Finance Review®
Posted on March 10, 2026
3 min readLast updated: March 10, 2026
Quick Summary
European heavyweights like Amundi and Allianz Global Investors are taking positions against volatile market swings in ECB and BoE rate expectations, buoyed by surging energy prices and bond yields.
Big European investors bet against swings in ECB, Bank of England rate expectations
European Investors Respond to Volatile Central Bank Rate Expectations
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By Yoruk Bahceli and Amanda Cooper
Bond Market Swings and Investor Reactions
LONDON, March 10 (Reuters) - Big European investors are pushing back against sharp bond market swings that have upended expectations for central bank rate cuts, arguing they have gone too far even if surging energy prices raise inflation risks.
Asset Managers' Strategies
Amundi, Europe's largest asset manager, has bought short-dated British and Italian government bonds and Allianz Global Investors added to a position favouring longer-dated UK bonds, senior fund managers told Reuters on Tuesday.
Impact of Energy Prices and Geopolitical Events
A surge in energy prices since the U.S.-Israeli war against Iran has rekindled inflation fears. At one point on Monday, as oil surged towards $120 a barrel traders briefly priced in a high chance of a Bank of England rate hike this year. Before the war they had bet on a cut this month.
In an equally rapid U-turn on Tuesday, traders went back to pricing a 50% chance of a cut by year-end as oil prices dropped.
ECB and Bank of England Rate Expectations
Traders priced as many as two 2026 rate hikes from the European Central Bank on Monday, having priced a sizeable chance of a cut just last month. They were last pricing around a 70% chance of one rate rise by December.
Investor Perspectives on Central Bank Actions
"It's too early for central banks to act. So, we tend to fade this short term. If the market is pricing hikes like it is, I think it's a good value proposition," said Gregoire Pesques, chief investment officer of global fixed income at Amundi, which manages 2.4 trillion euros ($2.79 trillion).
Pesques echoed a view from many investors that the moves have been exacerbated by traders unwinding pre-war positions that were bullish on bonds.
Inflation Fears and Bond Market Impact
Inflation fears have hit UK and euro zone government bonds hard given Europe's reliance on energy imports. Interest-rate sensitive two-year yields have risen around 30 bps in Britain and Germany as bond prices have tumbled.
Opportunities in Short-Dated Bonds
That makes short-dated bonds attractive, said Pesques, who has added UK two-year paper. He is also buying two-year Italian bonds and selling 30-year debt.
Allianz Global Investors' Positioning
Ranjiv Mann, a senior portfolio manager at Allianz Global Investors, said he added to a position favouring 30-year British relative to U.S. Treasuries last week. He believes the BoE will still cut rates in 2026.
Market Outlook and Supporting Factors
"Clearly, in the short term, markets are questioning some of that (Bank of England rates) pricing, but we think the underlying backdrop still remains supportive for gilts relative to other markets," Mann told Reuters on Tuesday, also citing a weakening labour market, easing inflation and tight fiscal policy.
(Reporting by Yoruk Bahceli and Amanda Cooper; editing by Dhara Ranasinghe and Karin Strohecker)
Key Takeaways
- •Amundi has targeted short-dated UK and Italian bonds, while Allianz favors longer-dated UK bonds amid volatile rate expectations.
- •Bond markets have rapidly flipped—from pricing in imminent BoE rate hikes to betting on cuts, and from ECB cuts to potential hikes—driven by sharp energy price fluctuations due to the U.S.–Israeli war on Iran.
- •The energy shock has drastically raised oil above $100 a barrel and pushed European gas prices up by over 40–50%, intensifying inflation risks and central-bank uncertainty.
Frequently Asked Questions about Big European investors bet against swings in ECB, Bank of England rate expectations
1Why are European investors betting against sharp rate swings?
Investors believe recent bond market moves exaggerate inflation risks and expect central banks to avoid hasty rate policy changes.
2How have energy prices affected rate expectations?
Surging energy prices due to geopolitical tensions have increased inflation fears, temporarily leading to expectations of rate hikes.
3What strategies are asset managers using in response to rate volatility?
Managers are buying short-dated UK and Italian bonds and favoring long-dated British government bonds over US Treasuries.
4How have UK and euro zone bond yields reacted to recent events?
Two-year government bond yields in the UK and Germany rose by about 30 basis points, making short-term bonds more attractive.
5Do investors expect rate cuts from the Bank of England?
Some managers believe the Bank of England will cut rates by 2026, despite short-term market uncertainty.
