Europe’s Bonds Dive
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Why are European bond yields spiking and how does Germany’s defence spending drive the move?
Massive moves in bond yields as Germany ramps up defence spending, much less movement in the United States, although the dollar is getting weaker and weaker. And we're hearing now some of the tariffs introduced this week will be wound back or at least delayed for a month. And the US services ISM prices are rising just as they were with manufacturing. And the ECB today ready to cut. It's Thursday, it's the sixth of March 2025. It's the morning call from NAB. Good morning. Well, this doesn't look like a good news story for Donald Trump. The dollar down again one point four percent to below one oh four point three on the DXY if he likes a stronger dollar. But there again, those pesky foreign imports, uh they'll be a little bit more expensive even before the tariff.
So he should be happy about that. The Aussie, meanwhile, it's up one point one percent to sixty three point four US cents. The euro is up one point six percent, the pound naught point eight percent. three percent higher. But the real story today is European bond yields. On ten year German bunds, they are up thirty basis points, up twenty six in France, twenty eight in Italy. In fact, uh pretty much the same story all over Europe. Even in the UK yields up there fifteen basis points, whereas ten year treasuries just three basis points higher today. And then there's stocks higher in the US, a one and a half percent rise in the Dow at close one. point one percent for the Nasdaq, one point one percent for the S P as well.
This is the opposite of yesterday. But Europe, which was on the rise yesterday, continues that way today, up one point nine percent for the Eurostocks fifty at their close, up three point four percent for the DAX and one point six percent for the CatCarrant, uh the FTSE one hundred also up one and a half percent. Stocks in the US helped a little bit by the news that there might be, now we know there will be Uh a month delay on the twenty five uh basis point tariffs on Mexican and Canadian car exports. And oil down quite a bit.
What impact will the delayed US‑Canada‑Mexico car tariffs have on markets and the dollar?
It actually hit a three year low uh during the session. It's off those lows now, but still down two point eight percent for WTI and two point four percent for Brent. Brent now just above sixty nine a barrel. So Taylor Newgen is with me today. Look, the last time German Bundes uh fell this much, which is why obviously yields are so much higher today. The last time it was this pronounced was the collapse of the Berlin Wall. Uh so that tells us the uh the strange times we're in, Taylor. And obviously this is all to do with defence spending the that was announced yesterday.
Yeah, good good morning, Phil. So yeah, definitely uh Europe and and European rates markets uh front front and center, despite you know, no shortage of of news on tariff headlines and and other things. But it is that uh you know that plan from from Germany that was agreed between the CDU and the the SDP to increase defence spending. So, you know, the detail there, a plan to exempt Defence spending above one percent um of GDP from those strict constitutional borrowing limits that they have in in Germany. Not just defence spending, there's also a a five hundred million dollar special fund for for infrastructure that has been agreed as well. So, you know, some of the detail of this might might change.
But, you know, the big news here is this is a plan to kind of get this through uh before the the kind of months long um process and and get it through before the the new complexion of um of German Parliament take takes shape. And so, you know, that has seen, you know, certainly a fairly clear signal that uh you know European fiscal policy will be on a fairly different footing uh going forward and and that's contributed to that that rise in in yields that we've seen, as you say, the the you know, that thirty basis point increase in German Sorry.
But it's also reflected in equity. But it's also reflected in
equities as well, isn't it? So that's the there's the interesting thing. Not a concern about the fact that, you know, perhaps at just a couple of weeks away there's the real danger that they're gonna be hit with twenty five percent tariffs.
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Chapters
8 chapters
1
Why are European bond yields spiking and how does Germany’s defence spending drive the move?
0:01–1:50
2
What impact will the delayed US‑Canada‑Mexico car tariffs have on markets and the dollar?
1:50–3:58
3
How are the latest ISM Services PMI and ADP data shaping expectations for US payrolls?
3:58–6:51
4
What does the ECB’s anticipated rate cut mean for euro‑area yields and inflation?
6:51–9:54
5
How are Germany’s defence‑spending exemption and infrastructure fund influencing fiscal policy?
9:54–12:41
6
Why are Australian and Asian trade relationships buffering the economy from tariff shocks?
12:41–14:59
7
What are the implications of the RBN Governor’s sudden resignation for monetary policy?
14:59–17:20
8
Which upcoming data releases (GDP, trade balances, non‑farm payrolls) should investors watch next?
17:20–18:54