Break away from “debt brake”
In Germany, parties agreed on historic debt deal, paving the way for increased spending surge in military and infrastructure projects. The decision elevated Germany’s borrowing costs with its 10-year Bund yield briefly approaching 3.0%, driving up yields across most other Eurozone countries. While increased Bund issuance may strengthen the Euro as a reserve currency, higher yields pose risks for already indebted nations.
New piece of the tariff puzzle – Liberation Day
US tariff tensions with major trading partners began to weigh on investor sentiment across different asset classes, with S&P 500 down 5.8% in March. Market uncertainty and volatility driven by trade policies are likely to continue over April, as the President is set to announce new far-reaching tariffs on April 2, “Liberation Day” as he calls it. Although the Treasuries have been trading in a narrow range recently, it may easily change if the tariffs urge Fed to make unexpected moves.
Regional markets
In regional sovereign Eurobond markets yields on all sovereign bonds increased. Kazakhstan saw the largest, 22.8bps increase over the month, followed by Turkey’s 21.2bps, and Georgia’s 11.3bps. Yields on the Turkish bonds jumped significantly following the onset of political turmoil in the country.
