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German 10-year bond yield hit its highest level in 18 months
According to Bloomberg, Germany's 10-year bond yield hit 2.93% on Wednesday, the highest since October 2023. The increase was driven by the Germany's future government planning to relax borrowing rules for defense and infrastructure investments.
The potential change in Germany’s fiscal policy led to the gap between the 2- and 10-year yields now amounting to about 70 basis points, the highest since July 2022, the agency reports. However, some market participants believe the repricing has already overshot.
Such trend has also spilled over to other European counties’ bonds. This reflects market expectations that these nations will also boost defense spending, Bloomberg notes.
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