Published by Global Banking & Finance Review®
Posted on March 5, 2025
1 min readLast updated: January 25, 2026
Add as preferred source on GoogleGermany's borrowing costs may reach 2008 levels after a debt brake overhaul. Goldman Sachs forecasts a rise in Bund yields due to increased borrowing.
By Harry Robertson
LONDON (Reuters) - Germany's 10-year borrowing costs could surge to their highest levels in more than 16 years after politicians reached a historic deal on Tuesday to overhaul the country's debt brake, Goldman Sachs has said.
Friedrich Merz's conservatives and the Social Democrats agreed to create a 500-billion euro infrastructure fund and rewrite borrowing rules as they seek to revive a struggling economy and spend more on defence.
The implied extra borrowing via debt markets caused bond prices to tumble and yields to spike on Wednesday. Germany's 10-year borrowing costs were set for their biggest one-day rise since the late 1990s on Wednesday, up 26 basis points, taking them to 2.735%.
The extra borrowing and spending "would imply a 50-120 basis point increase in 10-year Bund yields over the medium term relative to our current forecasts of 2.5%, pointing to a potential range for Bunds of 3.0-3.75%," analysts at Goldman said in a note.
That would be the highest level since late 2008, when bond yields began to fall as central banks tackled the global financial crisis.
(Reporting by Harry Robertson; Editing by Amanda Cooper)
German politicians agreed to create a 500-billion euro infrastructure fund and rewrite borrowing rules to stimulate the economy.
The borrowing costs could increase by 50-120 basis points over the medium term, potentially reaching levels not seen since late 2008.
The implied extra borrowing caused bond prices to tumble and yields to spike, marking the largest one-day rise since the late 1990s.
Current forecasts suggest a potential range for Bund yields of 2.5% to higher levels due to the increased borrowing and spending.
The article references late 2008 when bond yields began to fall as central banks responded to the global financial crisis.
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