Germany Incurs Highest Borrowing Costs

Germany paid the highest borrowing cost on 10-year bonds since 2009, after selling 4.2 billion euros worth of bonds maturing in August 2036, at an average yield of 3.39%. The rise in yields comes amid a global wave of selling in bond markets, as investors demand a higher premium due to persistent inflationary pressures, rising energy prices, and growing political uncertainty in Germany following the loss suffered by Chancellor Friedrich Merz’s party in local elections. Despite the higher borrowing costs, the auction was covered 1.47 times, slightly exceeding the annual average of 1.38 times, indicating continued demand for bonds at current yield levels. The yield on German 10-year bonds, the benchmark for the euro area, reached its highest level in 15 years at the beginning of the week.