German Bond Yields Rise Amid Fiscal Strategy Shift

German bond yields are rising as investors focus on expansionary fiscal plans, influenced by U.S. Treasury trends and ECB rate expectations. German 10-year yields have climbed, widening the gap with 2-year yields. Market risks center on U.S.-EU tariffs, ECB policy, and European fiscal developments.

In a notable move, the German bond yield curve is experiencing its fourth consecutive week of steepening. Investors are turning their attention to expansionary fiscal policies, pushing long-term yields higher, while short-term yields remain steady.

The euro area's government bond markets are mirroring U.S. Treasury trends, with rising 10-year yields amid concerns over Federal Reserve independence and potential inflation resurgence due to tariffs. German 2-year bond yields, sensitive to ECB policy expectations, edged up by one basis point to 1.85%.

Germany's benchmark 10-year bond yields rose to 2.70%, continuing a significant monthly uptrend in July. Meanwhile, analysts are monitoring tariff negotiations between the U.S. and EU, which could impact ECB policy. Expectation of an ECB rate cut by December hovers at 90%, while Italian and French bond yields reflect varying national economic pressures.

(With inputs from agencies.)