🇩🇪🛟German 30-year bond yields just hit a 10-year high — and the arrival of Chancellor Merz hasn’t calmed the storm. With 30Y Bunds breaking above 3.04%, markets are now pricing in a structural shift in Germany’s fiscal outlook.

Merz’s center-right coalition promised fiscal discipline and market-friendly reforms, but investors remain unconvinced. Rising public sector wage demands, sluggish growth, and mounting defense spending have cast doubt on long-term debt sustainability — and the bond market is responding.

While the 10Y Bund yield hovers at 2.57%, the steep curve (spread vs. 30Y) reflects growing concerns about Germany’s long-term financing costs. For comparison: U.S. 30Y Treasuries yield 4.6%, but with a flatter curve — suggesting more anchored expectations.

Germany’s real headache lies in fragmentation risk. As Bund yields rise, so do Italian BTPs and French OATs, potentially widening spreads and testing the ECB’s resolve. Despite Lagarde’s previous reassurances, a persistent climb in yields across the eurozone could reignite speculation around PEPP reinvestments or new intervention mechanisms.

Meanwhile, the euro slipped slightly below $1.08 and the DAX posted minor losses, indicating that risk sentiment remains fragile. European banks — sensitive to bond volatility — saw a 1.2% decline on the day.

This is more than just a local story. If Bund yields continue rising toward 3.2% without fiscal credibility improvements or ECB backstopping, Germany’s role as the eurozone anchor could be tested. The next bond auction results — and market reception — will be critical.

Is this simply a repricing of inflation and supply? Or are investors signaling broader skepticism toward Germany’s political and fiscal trajectory?#AMAGE