German and French Bond Yields Near 16-Year Highs Amid New Borrowing Plans and Tariff Worries

Bridgette Randall
13 Mar, 2025
London

European markets lacked direction amid escalating trade tensions with the U.S. and geopolitical uncertainties. 

Benchmark indexes in Frankfurt and Paris turned lower as investors reviewed the latest political development in Germany. 

The two leading German parties, CDU and SPD, lacking a clear majority, are struggling to form a coalition with the Green Party and prepare a plan to increase the federal government debt limit to finance infrastructure spending. 

So far, the Green Party has rejected the government's proposal to raise the debt limit to finance the 500 billion infrastructure spending plan proposed by the CDU leader Friedrich Merz. 

Market sentiment was also cautious amid escalating trade tensions with the U.S., and the Trump administration said it plans to slap additional tariffs on European steel, automobiles, and other manufactured products. 

The tit-for-tat tariffs are likely to provide additional headwinds for eurozone economic growth, and the currency union is already struggling under high cost of living and weak exports growth.

On the economic front, industrial output in the eurozone in January was stable compared to a year ago, according to data released by Eurostat. 

 

Europe Indexes and Yields

The DAX index decreased by 0.5% to 22,561.20, the CAC-40 index edged lower 0.3% to 7,963.96, and the FTSE 100 index advanced by 0.03% to 8,542.94. 

The yield on 10-year German bonds inched lower to 2.88%, French bonds increased to 3.56%, the UK gilts moved up to 4.68%, and Italian bonds edged higher to 3.94%.

The euro decreased to $1.09; the British pound was lower at $1.29; and the U.S. dollar was lower and traded at 88.20 Swiss cents.

Brent crude increased $0.11 to $71.05 a barrel, and the Dutch TTF natural gas was higher by €0.58 to €42.41 per MWh.

 

Europe Stock Movers

Deliveroo PLC plunged 6% to 117.0 pence after the food delivery company pushed back its key financial metric timeline by a year to 2026. 

The company delivered its first annual profit after gross sales, annual revenue, and average transaction size increased in 2024. 

Hugo Boss AG declined 5% to €36.13, and the German fashion company reported a decline in annual net income in 2024.

The company also said sales growth in the year so far has been muted amid cautious consumer sentiment and challenging macroeconomic conditions in the U.S. and China.

Telefonica jumped 1.8% to €4.30 after the Spanish telecommunications company said it has agreed to sell its business in Colombia for $400 million to Millicom Spain. 

Hannover Re jumped 1.4% to €276.10, and the reinsurance company reported a significant improvement in its property & casualty insurance portfolio. 

IG Group Holding increased 2% to 944.0 pence after the financial derivative trading platform operator reported a 12% increase in revenue in the fiscal third quarter of 2025.