European government bond indices are likely to expand in 2026 due to high fiscal deficits in the largest European economies and a continued trend towards more euro-denominated public issuance. Demand from the ECB will shrink further due to quantitative tightening. However, repatriation from European investors and more purchases by insurers and pension funds could be enough to meet the increased suppl
Key takeaways
- European government bond supply is set to rise sharply in 2026 as large fiscal deficits – particularly in Germany and France – drive higher net issuance and gross issuance near €1.4 trillion, raising refinancing costs, especially on five‑year paper. ECB quantitative tightening will reduce its purchases, making net‑net issuance the largest on record and materially increasing the free float.
- Continued euro‑denominated public issuance, a possible shift towards short-dated bills, and stronger demand from repatriating European investors, insurers and pension funds could absorb much of the extra supply. Country impacts will vary, with Germany the largest nominally and smaller markets facing bigger increases.
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