Germany's 30-year bond yield rises to 3.254%, highest since October 2023

Germany's 30-year bond yield rises to 3.254%, highest since October 2023

Germany's 30-year bond yield surged to 3.254%, marking its highest level since October 2023. The increase comes amidst heightened market focus on European spending and borrowing, as well as ongoing trade negotiations between the U.S. and the EU [1].

The rise in yields was driven by a series of bond auctions in Europe and a rise in Japanese yields, which added pressure to euro zone bonds. Germany's 10-year bond yield, the euro zone benchmark, rose 4 basis points to 2.64% on Tuesday, while the 30-year yield climbed 4 basis points to 3.16% [1].

The German government plans to increase spending significantly on defense and infrastructure, which is expected to boost borrowing requirements and drive up longer-dated yields. This has particularly affected very long-dated yields, with Germany's 30-year yield hitting 3.164% on May 22, its highest since March [1].

The European Central Bank (ECB) has kept short-dated bond yields in check due to fears of a major slowdown in inflation, which could prompt further rate cuts. However, the focus on debt supply and the upcoming trade negotiations with the U.S. has kept investors on edge [1].

Germany's 30-year bond yield has been influenced by several factors, including the absence of additional U.S. tariffs on the EU, the EU's focus on reaching a trade deal, and the potential for higher borrowing due to increased government spending [1].

The rise in yields is a reflection of the market's expectation that the ECB may not cut rates further, given the recent inflation data and the uncertainty surrounding the trade negotiations. The bond market remains cautious, with analysts expecting more clarity on trade negotiations before rates drift higher [1].

References:

[1] https://m.economictimes.com/markets/bonds/euro-zone-bond-yields-at-six-week-highs-bond-auctions-in-focus/articleshow/122324578.cms