5 Questions for Juliane Barthold, Bankhaus Metzler

We believe that the main growth drivers are technological advances and productivity gains achieved through the use of Artificial Intelligence. It remains to be seen how big the impact of AI will ultimately be and whether it will be capable of compensating for the costs of investment. In the US, falling interest rates are also likely to act as a driving force for growth, as we expect the country’s trade policy to only temporarily increase inflation. We are forecasting further interest rate cuts by the Fed this year. Although China’s economy is likely to grow steadily, we believe that its rising debt will have a dampening effect. We currently see the political uncertainties originating from US President Trump, escalating trade conflicts, and geopolitical tensions as the key risks to global economic growth.

We expect the German government’s fiscal package to significantly boost growth in our country. It remains to be seen whether this will have a long-term impact on growth potential in Germany, which is why we named our 2026 annual outlook ‘The principle of hope’. We estimate GDP growth for Germany at 1.2% in the current year, and therefore most likely significantly higher than in previous years. These were characterized by fairly low growth. In our opinion, the defence industry in particular, but also the construction industry, should be the first to benefit from the easing of the debt brake before spillover effects will be visible in other industries.

We expect the German federal budget deficit to exceed 4% this year. In the coming years, however, new borrowing is likely to remain within reasonable limits and return to the 3% target set by the Maastricht Treaty. Despite the planned spending, Germany remains relatively conservative in terms of debt levels compared to other EU countries. Bund yields had already reacted with higher levels to the announcement that the debt brake would be lifted in 2024. For this reason, we do not expect any further significant increases in yields. We see the yield on 10-year Bunds at 2.8% at the end of 2026.

We believe that investors favor longer maturities in the current interest rate environment. Looking at the market, maturities in the 5-7 year bucket are experiencing high demand. Last year, demand was more tilted towards the shorter end of the curve, with maturities of three years, partly due to the lack of steepness at the time. However, we now see more potential for longer durations, which is also visible in the primary markets.

Our clients have always been active in the covered bond and Pfandbrief segment. Last year, however, SSA spreads were more attractive, which is why our customers tended to be cautious in this area. For our own treasury book, we have also been investing in covered bonds for many years. At the moment, however, risk premiums are trading at narrow absolute levels.