Germany's fiscal expansion boosts yield expectations, several major banks warn of German bond risks.

Due to Germany's fiscal expenditure actions increasing debt supply and driving economic growth, some global large banks are issuing new warnings on German government bonds. Goldman Sachs strategists stated that the repricing of German bond yields still has a long way to go, thus far being influenced by investors' continued demand for AAA-rated bonds during market volatility. They project that the yield on 10-year German government bonds will reach 2.80% by the end of 2025 and 3.25% in 2026. Goldman Sachs strategists George Cole and Friedrich Schaper recently wrote in a report, "The impact of fiscal expansion reflected in German bond yields would be much greater without concerns over tariffs and potential inflows of safe-haven funds." They added that as the effects of fiscal expenditure policies spread throughout the region, investors will also begin to digest healthier long-term growth expectations, further increasing upward pressure on interest rates and yields.