Government borrowing costs rose globally as German bonds experienced their biggest daily jump in yields since the country’s reunification 35 years ago. This sell-off followed plans by likely coalition parties in Germany to reform historic debt policy rules, allowing increased national defense spending. Yields on German government bonds, known as bunds, surged, with the 10-year yield adding around 30 basis points. Deutsche Bank Research Strategist Jim Reid noted this political shift fueled a risk-on move for European assets. RaboBank analysts highlighted anticipation of fiscal boosts driving the sell-off, evidenced by rising inflation expectations. European bond yields continued to rise ahead of the European Central Bank’s monetary policy update, with markets expecting a quarter-point rate cut. Italian, French, and Swiss bond yields also increased, while UK and Japanese government bonds saw similar trends. Marc Ostwald from ADM Investor Services cited fears of Trump’s tariff wars and Germany’s increased defense spending as key drivers behind the global bond sell-off. Ralf Preusser from Bank of America Global Research pointed to uncertainties around tariffs, geopolitics, and U.S. fiscal policy challenging market forecasts. Emmanouil Karimalis from UBS Investment Bank noted the market’s response to Germany’s fiscal reforms and the EU’s ReArm Europe plan, suggesting higher premia due to expected increased issuance. — news from CNBC
