Germany's Bond Yields Surge as Investment Plans Unveiled Amid Middle East Tensions

Germany's long-term government bond yields saw an uptick on Tuesday following the cabinet's approval of a draft budget for 2025, which includes record investments to boost Europe's largest economy. This financial news took precedence even as tensions in the Middle East escalated, with Israeli Defence Minister Israel Katz announcing strikes on Tehran.

Despite hopes raised by a ceasefire, deadly attacks continued, but euro zone bond yields remained primarily influenced by the German budget announcement. The 10-year and 30-year German bond yields experienced significant increases, the largest one-day rise since early May, driven by unexpected investment measures.

The European Central Bank's potential for further rate cuts in light of volatile energy markets was highlighted by policymakers on Tuesday. Meanwhile, euro zone economic data indicated stagnation, yet traders remain optimistic about one more ECB rate cut this year, spurred by a recent drop in oil prices.

(With inputs from agencies.)