European Bond Yields Surge Amid Rising Borrowing and Trade Negotiations

European bond yields experienced notable increases on Tuesday, with Germany's longer-dated bonds hitting a six-week high. This movement comes amid a lack of new U.S. tariffs on the European Union, prompting market focus to shift towards European spending and borrowing trends.

Attention on borrowing was emphasized by a series of bond auctions across Europe, as a rise in Japanese yields added pressure to euro zone bonds. Germany's 10-year bond yield, a euro zone benchmark, rose to 2.64%, its highest since May 21. Meanwhile, the yield gap between German two-year and 10-year bonds widened, marking the steepest curve since late May, as investors reacted to trade developments.

In a broader context, the EU aims to finalize a trade deal with the U.S. soon, influenced by discussions between European Commission President Ursula von der Leyen and President Donald Trump. The potential increase in Germany's spending on defense and infrastructure is predicted to increase borrowing, thus driving up long-dated yields. Concurrent bond issuances by several European nations underscore the financial landscape's focus on debt supply.

(With inputs from agencies.)