European Bond Sell-Off Continues Amid ECB Rate Cut Expectations

The global sell-off of bonds continues today (March 6, 2025), driven by Germany’s plans to reshape growth prospects through massive spending on defense and infrastructure. A rate cut by the European Central Bank (ECB) is anticipated, with a decrease of 0.25% expected. German 10-year bond yields have risen eight basis points to 2.87%, while Italian 10-year yields surpassed 4% for the first time since July. Japanese yields hit their highest level in a decade. Meanwhile, European stocks rose as S&P 500 futures declined. Investors continue to react to Germany’s plan to unlock hundreds of billions of euros for investments. Analysts note that yield movements are tied more to developments in Germany than the €800 billion package announced by EU Commission President Ursula von der Leyen. Economists from Goldman Sachs suggest this could boost military spending across the Eurozone. The ECB is expected to cut rates today, with nearly unanimous predictions of a reduction to 2.5%. Disagreements persist among policymakers about future rate moves, ranging from no further cuts to rates dropping to 1% by early 2026. Market expectations now lean toward just two more rate cuts this year. The withdrawal of U.S. military support has also sparked concerns over increased defense spending in Europe. Ongoing debates within the ECB highlight differing views on how monetary policy impacts the economy.