Eurozone Yields on the Rise Amid Fiscal Shifts

Eurozone yields neared multi-month highs after Germany's Parliament approved a large public spending increase. Investors await the Federal Reserve's policy decision. German and Italian bond yields remain close to recent peaks, reflecting changing fiscal policies and market uncertainties.

On Wednesday, eurozone yields hovered near their highest levels in recent months, following a significant decision by the German Parliament to increase public spending. This shift marks a departure from decades of fiscal conservatism, aimed at invigorating economic growth and boosting military budgets.

The German Bundestag's approval has set the stage for investors to pivot their attention toward the Federal Reserve's upcoming policy announcement. Meanwhile, the Bank of Japan has opted to maintain steady interest rates, with the Fed's decision expected at 1800 GMT. Germany's 10-year government bond yields declined by 2 basis points to 2.79%, down from last week's peak of 2.938%.

As Germany's shorter-term 2-year yields held steady at 2.18%, reflecting sensitivity to European Central Bank rate policies, market analysts are pricing in significant rate changes. Italian 10-year yields remained level at 3.87%, close to their highest since July, and yield spreads between key European bonds indicate underlying market risk perceptions.

(With inputs from agencies.)