The sharp widening of interest spreads on Eurozone sovereign bonds slowed down on Friday. Traders are betting that the ECB will be forced to reduce the number of interest rate hikes to support member countries with heavy debt burdens in the region. Traders are beginning to consider the impact of soaring borrowing costs in the periphery of the Eurozone on the overall economy. This prompted them to drastically cut their bets on the ECB's rate hike. Currently, the money market expects the ECB to raise interest rates two to three times before the end of next year, and the market fully included four rate hikes earlier this week. In addition to concerns about inflation driven by energy prices, market concerns about whether France can control spending in the context of political division are once again heating up. The budget plan submitted by the French government on Thursday was described by the country's financial supervisory authority as “partial optimism.” Steve Ryder, senior portfolio manager at Aviva Investors, said that the sharp rise in yield in European debt-burdened economies meant that the financial environment had experienced “unnecessary tightening”, further increasing downside risks to economic growth. “This could be a circuit breaker for interest rate expectations.”

The sharp widening of interest spreads on Eurozone sovereign bonds slowed down on Friday. Traders are betting that the ECB will be forced to reduce the number of interest rate hikes to support member countries with heavy debt burdens in the region. Traders are beginning to consider the impact of soaring borrowing costs in the periphery of the Eurozone on the overall economy. This prompted them to drastically cut their bets on the ECB's rate hike. Currently, the money market expects the ECB to raise interest rates two to three times before the end of next year, and the market fully included four rate hikes earlier this week. In addition to concerns about inflation driven by energy prices, market concerns about whether France can control spending in the context of political division are once again heating up. The budget plan submitted by the French government on Thursday was described by the country's financial supervisory authority as “partial optimism.” Steve Ryder, senior portfolio manager at Aviva Investors, said that the sharp rise in yield in European debt-burdened economies meant that the financial environment had experienced “unnecessary tightening”, further increasing downside risks to economic growth. “This could be a circuit breaker for interest rate expectations.”