Institution: The market may be overreacting in reflecting expectations of a rate hike by the European Central Bank.

In a report, the interest rate strategist at Societe Generale in France stated that there is a risk of market overreaction in reflecting future expectations of more interest rate hikes, as the European Central Bank is expected to conduct its first preemptive rate hike next week. They maintain a bearish view on German government bonds and prefer to sell on rallies rather than buy on dips. They said, "The energy crisis is weighing on the growth prospects of the eurozone, anchoring expectations for medium-term European Central Bank interest rates around 2.50% and maintaining value in the middle of the euro yield curve." Data from the London Stock Exchange Group shows that the money market currently reflects expectations of around 63 basis points of ECB rate hikes this year, with the 25 basis point hike expected at the June 11 meeting already fully priced in.