A selloff in European bond markets may be underway, but it doesn’t signal a looming debt crisis. The sudden surge in interest rates, particularly in Germany, is largely driven by an unexpected fiscal injection rather than fears about the financial stability of peripheral nations.
The euro zone’s yield curve has risen significantly, with US yields remaining lower despite the broader increase. However, investors are not panicking, as borrowing costs for weaker economies remain manageable and do not pose a threat to the entire yield curve.
The fact that regional security funding is being provided by Brussels helps keep borrowing costs in check. The euro has strengthened against the dollar this year, with a gain of over 3%, indicating that Europe’s bond market is functioning as intended. This suggests that the region is taking proactive steps to support its own economic growth and stability.
Source: https://www.bloomberg.com/opinion/articles/2025-03-06/europe-is-having-the-right-sort-of-bond-rout