July 11 Reuters Euro zone bond yields fell on Monday while longterm inflation expectations dropped below 2 as recession fears deepened after warnings about a possible cut in Russian gas supplies.

French Finance Minister Bruno Le Maire said on Sunday the French government was preparing for a total cutoff of Russian gas supplies. 

Germany has moved to stage two of a threetier emergency gas plan, warning of recession if Russian gas flows are halted.

The fiveyear, fiveyear forward inflation swap, fell to 1.9898, below the 2 target of the European Central Bank, at its lowest since March 2.

The ECB and us, we39;re still not seeing tangible signs of second round effects, so I suppose on the inflation side … they39;ll be satisfied with the fiveyear fiveyear forward inflation swap coming down, said Peter McCallum, rates strategist at Mizuho.

Analysts still expect a quite aggressive monetary tightening path by yearend, while being more cautious over 2023.

In a nutshell, faster monetary tightening in 2022 and then a stop next year, if not even a reversal, said Erik F. Nielsen, group chief economics adviser at Unicredit.

Nielsen mentioned the chance of the global economy falling into recession in 2023 and inflation rates coming off their peaks and starting to decline probably quite quickly.

Ill bet my money on the ECB ending its hikes well before we get to policy rates of 2, Nielsen added.

Money markets still price in around 145 bps of ECB rate hikes by yearend, and…