LONDON: Euro zone longer dated bond yields rose moderately in early trading on Monday, as traders processed the weekend’s geopolitical developments which will likely require greater European borrowing to spend on defence.
Germany’s 10-year Bund yield, the euro zone benchmark, rose 4 basis points in early trading to 2.43%.
The move was partly a rebound from Friday’s more than two-week low of 2.37%, but also came after European leaders agreed at a Sunday summit in London that they must spend more on defence.
The European Commission chief suggested the bloc could ease rules that limit debt levels.
Euro zone bond yields rise, Ukraine in focus
In addition, Reuters reported, citing sources, that the parties in talks to form Germany’s new government are considering quickly setting up two special funds potentially worth hundreds of billions of euros, one for defence and a second for infrastructure.
Italy’s 10-year yield was 3 bps higher at 3.49%. Shorter dated bonds moved less. Germany’s 2-year yield was down 2 bps at 2.41%.