German Yields Soar to Multi-Year Highs on Warsh's Hawkish Tone
German government bond yields skyrocketed on Monday following Federal Reserve Chair Kevin Warsh's hawkish tone. The surge in long-end borrowing costs reflects a broader re-pricing of global interest rate curves, with investors demanding higher term premia to hold duration paper amid stubborn inflation.
The policy-sensitive two-year Schatz yield rose to 2.898%, its highest level since July 2024, while the benchmark German 10-year Bund yield advanced to 3.2903%, touching its highest level since 2011.
Money markets responded by lifting the probability of a 25-basis-point U.S. rate hike in September to near 60%, up from roughly 35% earlier last week. The hawkish shift in U.S. rate expectations immediately spilled over into European debt markets, undercutting demand for core European sovereign debt and pushing yields higher across all tenors.