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(Bloomberg) -- The great run in European government bonds is coming to an end, according to a portfolio manager at J.P. Morgan Asset Management, who is now betting Australia will be the next market to outperform.

Kim Crawford said there is little room for further gains in Europe compared to peers given swap markets are fairly pricing the amount of interest-rate cuts the European Central Bank will likely deliver. Meanwhile, a dovish pivot from the Reserve Bank of Australia — which has yet to lower borrowing costs in this cycle — is setting up Aussie debt for a rally relative to other developed markets.

“A lot of the Europe story has played out,” said Crawford, a global rates manager at J.P. Morgan Asset, which oversees $3.5 trillion in assets. “Australian government bonds are the ones that probably are most attractive to us right now. That’s a more interesting near-term divergence story for us.”

European government bonds have outperformed US peers for more than a year amid expectations the ECB will cut rates more aggressively than the Federal Reserve to support the bloc’s economy. That has driven the spread between 10-year German and US notes to 215 basis points, close to the widest levels seen over the past five years.

Australian bonds, meanwhile, have been trading in a narrow range for much of the past 18 months as the central bank held rates unchanged amid persistent concerns about price pressures. Last week however, the RBA said that it’s “gaining some confidence” inflation is moving sustainably toward target.

Markets now favor three quarter-point cuts from the RBA in 2025, according to swaps, compared to two expected from the Fed. The ECB is seen delivering as many as five, but Crawford said positioning is already stretched. The long trade on short-dated European notes is one of the most crowded in bond markets, she added.

For the ECB to deliver more easing than what’s priced by markets, there would need to be a big hit in investments or consumption, according to the London-based portfolio manager. But the expectation that Germany will loosen its fiscal policy next year makes it unlikely that will happen.

“Near-term, I think Europe is a little bit harder to see significant outperformance,” she said.

--With assistance from Matthew Burgess.