Bond Markets Ride the Geopolitical Waves: A Deep Dive into German and Japanese Yields

German bond yields experienced their fourth consecutive rise on Wednesday, driven by a global market response to the Japanese debt selloff and ongoing geopolitical tensions. With 30-year yields increasing nearly 3 basis points to 3.51%, this marks a significant weekly rise not seen since early December.

The initial turbulence sparked by Tuesday's sharp increase in Japanese bond yields spilled into the euro zone debt market, calming slightly by Wednesday. Anne Beaudu of Amundi highlighted the market's cautious stance as it awaits further information from the World Economic Forum in Davos, a notable event due to U.S. President Donald Trump's discussions on Greenland.

While geopolitical issues, such as the U.S. demand for Greenland, exert pressure on European bonds, secondary market prices remain generally unaffected with steady demand. Germany recently sold 30-year bonds with increased yields and higher demand. This activity underscores strong interest in new bond issues, even amid global uncertainties.