Germany’s unprecedented decision to relax its borrowing limits signals a seismic shift in its economic strategy, unlocking over €1 trillion in potential spending. This move, targeting defence, infrastructure, and growth, aims to rekindle momentum after years of stagnation in Europe’s largest economy.
In early March, exceptional market movements were observed as German 10-year Bund yields marked the largest weekly increase since the 1990s. This rare event coincided with Germany’s significant fiscal shift, including proposals for infrastructure fund and reforms to the debt brake. These measures, alongside geopolitical uncertainties and Europe’s response to the manufacturing crisis, have reshaped economic prospects. For investors, the rise in yields and widening credit spreads present compelling opportunities to extend duration and capitalize on attractive market conditions.