FX.co ★ German Bund Yields Rise as Merz Secures Chancellorship After Unprecedented Setback

The yield on Germany's 10-year Bund has climbed to around 2.55%, marking its highest level since April 15. This increase follows the election of Friedrich Merz as chancellor in a second round of parliamentary voting on Tuesday. Merz's initial struggle to secure a majority—a historical first in post-war Germany—has underscored political instability as he forms a coalition between his conservative CDU/CSU bloc and the center-left Social Democrats. Merz enters office facing limited public support and a challenging environment marked by economic stagnation, the continuing conflict in Ukraine, and escalating U.S. tariffs. With political uncertainty diminishing, investor focus is returning to forthcoming decisions from central banks. The U.S. Federal Reserve is anticipated to maintain its current rates following a robust April jobs report, whereas the Bank of England might consider rate cuts due to concerns over economic consequences from U.S. trade policies. At the same time, Eurozone money markets continue to anticipate 60 basis points of rate cuts by the European Central Bank by the end of the year.