German 10-year bond yields exceed 3%, highest since 2011

Germany’s 10-year government bond yields have risen above 3%, marking the highest level since 2011. The increase is primarily driven by higher long-term inflation expectations rather than nominal rate movements, with real 10-year yields actually declining from 1.35% to 0.77%. This signals a shift in market dynamics: from 2014 to 2022, negative real yields allowed Germany to reduce debt servicing costs, but investor demand for positive real returns has resurged since 2022, particularly following the suspension of the debt brake in 2025.