Germany plans to increase debt issuance to fund defense projects.

Germany will increase its borrowing by about one-fifth more than originally planned in the coming months to fund a surge in spending; meanwhile, an agreement aimed at securing a 460 billion euro tax cut package underscores the growing trend in debt demand. The increase in third-quarter borrowing and tax measures are part of Chancellor Friedrich Merz's governing coalition's efforts to strengthen the armed forces and revive the sluggish economy. The cabinet also approved this year's budget and the government's medium-term financial plan, which includes a net increase of around 500 billion euros in debt over the next five years until 2029. According to the updated plan on Tuesday, the German Finance Ministry, which manages federal debt, plans to raise 118.5 billion euros in financing from July to September, an increase of 19 billion euros from the original plan in December of last year. German long-term bond prices have plummeted, with the 30-year bond yield spiking 10 basis points to 3.06%, the highest level since late May.