Yields across the CEE rise after Germany unveils investment plans

Today, we look at the developments on the bond market over last week as we have seen quite strong shift of long-term yields. The most sizable moved took place on the German market as 10Y yields moved by almost 35 basis point from Monday March 3. until Friday March 7. We associate such development with Germany announcing plans for huge infrastructure spending in the coming years (around 11% of German GDP). If the planned measures are adopted, we expect a significant positive impact on the economy in the coming years. At the top of that Commission President Ursula von der Leyen presented a plan to build a strong European defense. The plan combines reactivating the escape clause (allowing member states to significantly increase their defense spending without triggering the excessive deficit procedure) and a new financing instrument (similar to the EU recovery plan), which would provide Member States with loans of EUR 150bn for defense investments. The region followed the developments in Germany as we have seen yields rising across the region between 15 to 30 basis points. In several countries we have also revised the yield forecast based on recent developments. Impulse to German economic development and acceleration of growth would support the economic performance of the region as well.