The Transatlantic Bond Shock Has Room to Run
Will German debt yields rise above US Treasuries?
Friedrich Merz, German chancellor designate.
Photographer: Sean Gallup/Getty Images EuropeTuesday, March 4 was a very strange day in the bond markets: Yields in Europe moved sharply upwards while US equivalents barely budged. Though debt traders, of course, don’t mimic each other, they typically maintain the same bias, with changes happening gradually. Or they did - before Donald Trump started trashing transatlantic ties and the assumptions that undergird the global economy.
The principal catalyst for German bund yields to suddenly balloon was incoming Chancellor Friedrich Merz tearing up his lifelong austerity beliefs and pushing hard for half a trillion euros of defense and infrastructure spending. The rest of European bond markets swiftly followed.