The European plan to increase military spending has caused global bond yields to rise.

Bond yields rose on Monday as European leaders gathered to support Ukraine and discuss improving security measures across the continent, prompting investors to prepare for a surge in defense spending. The yield on Germany's 10-year government bonds rose by two basis points to 2.43%, boosting defense stocks and European stock indices, as the euro strengthened. This move helped boost global risk appetite, which has been on the rise since late last Friday with the surge in the US stock market and cryptocurrencies over the weekend. US bond yields also rose slightly. According to reports, the potential next government in Germany is considering setting up two special funds for defense and infrastructure spending, with a total amount possibly reaching billions of euros. Robin Winkler, Chief German Economist at Deutsche Bank, stated in a client report, "This would be a historic fiscal regime shift. If last weekend's reports are found to be true, the two funds in question would collectively constitute a major fiscal stimulus." A pressure valve sensitive to changes in German bond supply, the German bond spread, fell to a record low, reflecting investors' concerns about assuming more selling risk. Jens Peter Sorenson, Chief Analyst at Danske Bank, said, "Defense spending appears to be both at the national and EU levels - but undoubtedly defense spending is set to increase significantly. The issuance of long-term bonds will increase, so investors are hoping to get a risk premium." The euro rose 0.3% against the US dollar to 1.0403, as the dollar fell from its two-week high. Germany's main stock index rose by 0.9%, with defense stocks leading the gains, outperforming their Eurozone counterparts. Timothy Ash, Senior Emerging Markets Sovereign Strategist at Royal Bank of Canada Bluebay Asset Management, said, "If Russia wins this war, there will be no euro, this is a threat to the survival of the euro, just like the COVID-19 pandemic, it's about our security and defense. We need to raise this money."