The German 10-year bond yield has hovered around 2.5% throughout June 2025, as traders closely assess the economic outlook and monetary policy trajectory amid a sustained ceasefire between Iran and Israel. Germany recently approved its 2025 budget and 2026 fiscal framework, featuring record levels of investment aimed at boosting economic growth.
However, the budget has sparked concerns over increased bond supply, with Germany’s finance agency announcing an additional €19 billion in debt issuance for Q3, above initial projections, while confirming that no 50-year bonds will be issued this year. At the same time, NATO’s decision to raise defense spending targets from 2% to 5% of GDP by 2035 has fueled expectations of further borrowing, particularly by Germany, to meet these commitments. On the monetary front, analysts continue to forecast a 25-basis-point rate cut by the ECB before the end of the year.
