Is a significant change on the way in German fiscal policy? The markets don’t think so. The 10Y German Bund yield is still close to historic lows with a yield of 0.40%, showing little reaction to Bavaria’s recent elections in Bavaria, Hesse or news that Chancellor Angela Merkel is stepping down as head of the Christian Democrats (CDU). But change may be on the way. One that would be bearish not just for German bunds but for highly rated government bonds globally, including US Treasuries. (Fig.1).
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