Germany’s 10-year Bund yield surged past 2.9%, hitting its highest level since June 2011, as negotiations continued over securing parliamentary approval for a significant increase in state borrowing. The rise in yields reflects heightened investor uncertainty over the fiscal outlook, with concerns that prolonged political deadlock could delay crucial spending plans.
German bund yield surges to over 13-year high
The Greens party, whose support is pivotal for passing the measures in the outgoing parliament, has withheld backing for the proposal while putting forward alternative suggestions to reach a compromise. Co-leader Felix Banaszak indicated that further negotiations were likely, while a senior lawmaker from Merz’s conservative CDU/CSU bloc suggested the two sides were not far from an agreement. Market participants are closely watching the outcome, as failure to secure a deal could lead to increased volatility in German debt markets and impact broader Eurozone bond yields.
ECB may cut rates again
On the monetary policy front, signals are emerging that the European Central Bank (ECB) may pause further interest rate cuts in the near term. The central bank has recently adopted a more cautious stance on future rate changes, revising its near-term inflation forecasts upward amid lingering price pressures. ECB President Christine Lagarde also warned that escalating trade tariffs and expansive fiscal-spending plans could further complicate efforts to maintain price stability, potentially limiting the ECB’s room for maneuver in future policy decisions.
