Germany has long since taken Flack from Wall Street and financial capitals all over Europe for the extreme fiscal conservatism that has kept the country's debt low. But as the global markets condemned this week, investors rewarded Germany's caution by rounding up its state bonds called the federal government.
Investors have gathered after President Trump imposed on almost every trading partner 10 percent tariffs and, after their entry into force, even higher “mutual” tariffs were lifted and steadily surpassed in China in China over 100 percent.
The resulting tumult hit the US assets, including government bonds and dollars, usually as Haven's assets. As a result, investors who were looking for other places for security, such as gold, were looking for the Swiss francs and German federal government.
The 10-year-old return at the German Bund, which deals conversely at prices, fell to 2.56 percent close to his lowest level in more than a month. This is remarkable compared to the 10-year US financial return, probably the most important interest rate in the world that has increased higher. On Friday, the 10-year US return was around 4.5 percent and increased by almost half a percentage point in a week, an enormous step in this market.
Germany's strict limits for the government's borrowing gave the country an excellent AAA credit. But last month the legislators decided that the next government could give up the credit limit and take over trillion euros with fresh debts to strengthen the country's military and crumbling public infrastructure. The export -oriented economy in Germany is also heavily exposed to tariffs because its car manufacturers and other industrial companies are traded a lot with the United States.
The prospect of additional borrowing and a slow economy had started to put pressure on German federal bases. But the turbulence in the past few weeks has caused investors to return the country's debt as a source of security.
This week, the next Chancellor, Friedrich Merz, announced the next Chancellor, who also announced the blueprint for his government, which contained an economic plan to start the sick German economy. And before its planned borrowing, Germany benefits from small debts compared to the size of its economy with around 60 percent of gross domestic product. In comparison, the US debt is about 120 percent of the size of its economy.
It was “very striking” that in a moment the stress in which German bunts acted as “port of choice” instead of US state bonds, said Sander Tordoir, chief economist at the Center for European Reform, a research institute.
“There seems to be a real security bonus that is now for the debt of the German government,” he said.