Barclays: Energy prices remain a driver of yield spreads in the euro area government bonds.

Barclays interest rate strategist stated in a report that the narrowing of yield spreads in the eurozone government bonds is still influenced by energy prices, indicating that caution should be taken with positions expecting yield spreads to narrow. They said, "Overall, the tightening of yield spreads in eurozone government bonds remains consistent with the direction of energy price developments." They also stated, "Against the backdrop of energy shocks, fiscal pressures may pose risks to yield spreads of eurozone government bonds." They mentioned that while fiscal measures announced so far have been relatively limited in nature, in the medium term, high energy costs will increase structural spending pressures beyond defense spending needs.