Germany’s Fiscal Shift Drives Global Bond Sell-Off and Market Volatility

Germany's decision to relax debt rules for defense spending and infrastructure investment has spiked bond yields and rippled through global markets.

Germany's likely next chancellor, Friedrich Merz, announced plans to bypass the constitutional debt brake, enabling increased defense and infrastructure spending.
The yield on Germany's 10-year bonds saw its largest single-day jump since 1990, with broader increases in borrowing costs across Europe and globally.
The European Central Bank is expected to announce a rate cut, but rising inflation expectations have complicated monetary policy decisions.
Germany's fiscal policy shift is seen as a historic departure from its traditional debt constraints, raising both growth prospects and concerns about rising debt levels.
The euro strengthened against the dollar, while European equities, led by Germany's DAX index, surged on optimism about the economic impact of increased spending.