German 30-Year Bond Yield Surges 4% on Government Borrowing Plan

German long-term bonds experienced a decline as investors remained unsettled by the government's plan to increase borrowing. The 30-year bond yield rose to its highest level in nearly a month, reaching 3.07%, as concerns about the premium on long-term debt grew. The two-year bond yield remained relatively stable at 1.85%. This shift in the yield curve reflects market anxiety over the government's decision to raise its borrowing limit to address increased spending.

On Tuesday, the German government announced an increase in its borrowing plan to cope with rising expenditures. The market is still digesting this news, which has led to a sell-off in long-term bonds. The 30-year bond yield briefly rose by 4 basis points to 3.07%, the highest level since May 29. This increase in borrowing is part of a broader strategy by Chancellor Friedrich Merz's coalition government to stimulate the sluggish German economy and strengthen military capabilities. The government has also approved the 2025 budget and a mid-term fiscal plan, which includes a net new borrowing of approximately 500 billion euros by the end of 2029.

In response to the increased borrowing, the German government plans to raise 118.5 billion euros in the third quarter, an increase of 19 billion euros from the previous plan announced in December. This move is part of a broader strategy to support the economy and military spending. The government has also approved a 46 billion euro tax cut agreement, which further highlights the increasing demand for borrowing. The government's decision to increase borrowing has raised concerns among investors about the potential impact on the country's fiscal health and the stability of its financial markets.

The market's reaction to the increased borrowing has been mixed. While short-term German bonds have been supported by the rise in short-term U.S. bonds, reflecting expectations of a potential rate cut by the Federal Reserve in the coming months, long-term bonds have faced selling pressure. The 30-year bond yield rose to 3.07%, its highest level in nearly a month, as investors worried about the impact of increased borrowing on the country's fiscal health. The two-year bond yield remained relatively stable at 1.85%, reflecting the market's expectation of a potential rate cut by the Federal Reserve in the coming months.

The German government's decision to increase borrowing has raised concerns among investors about the potential impact on the country's fiscal health and the stability of its financial markets. While the government has assured that the increased borrowing is necessary to support the economy and military spending, investors remain cautious about the potential risks. The market's reaction to the increased borrowing has been mixed, with short-term bonds supported by the rise in short-term U.S. bonds, while long-term bonds have faced selling pressure. The 30-year bond yield rose to 3.07%, its highest level in nearly a month, as investors worried about the impact of increased borrowing on the country's fiscal health. The two-year bond yield remained relatively stable at 1.85%, reflecting the market's expectation of a potential rate cut by the Federal Reserve in the coming months.