Goldman Sachs and HSBC warn of higher German bond yields amid fiscal expansion

Leading global banks, Goldman Sachs and HSBC, are cautioning investors about rising yields on German government bonds as Berlin ramps up its budget spending. Despite strong demand for top-rated "AAA" assets, analysts note that the country’s debt market is now facing growing pressure.

Goldman Sachs has revised its projections, anticipating the yield on 10-year bonds to climb up to 2.80% by late 2025 and 3.25% in 2026. The safe-haven appeal of German debt has softened the impact of fiscal risks. However, increasing government expenditures are likely to push borrowing costs higher.

The market reacted swiftly: yields on 10-year German bonds jumped six basis points to 2.70%, reaching their highest level since mid-May. Similarly, 30-year bond yields rose to 3.18%, a peak not seen since March.

HSBC also raised its forecasts, increasing the projected 10-year yield by 25 basis points. The bank cited Germany’s widening budget deficit and the European Central Bank’s planned interest rate cuts in 2026 as key drivers of such a change.