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Bunds extend selloff on Germany's plans for higher

spending

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Markets price in higher growth, fewer ECB rate cuts

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Yields tick up after ECB cuts rates, releases forecasts

(Updates after ECB decision)

By Stefano Rebaudo and Harry Robertson

March 6 (Reuters) - Benchmark Bund yields rose again on

Thursday after recording their biggest daily rise in more than

25 years the previous day, as Berlin's plans for a huge spending

package led investors to expect a sharp increase in German bond

supply.

Yields ticked higher after the European Central Bank cut

interest rates by 25 basis points to 2.5% as expected, but

revised up its near-term inflation forecasts.

Germany is in for a massive ramp-up in spending, with a 500

billion euro ($540.90 billion) special fund sought for

infrastructure and plans to unshackle defence investment from

restrictive borrowing rules.

"Given inevitable lags in fiscal policy, additional spending

could only start to filter through to the economy later this

year and into 2026," said Mark Haefele, chief investment officer

at UBS Global Wealth Management.

"But despite these caveats, the bold fiscal plan has the

potential to boost growth and support euro zone assets," he

added, mentioning a possible lift to confidence and an improving

backdrop for equities.

Yields on 10-year Bunds were up 7 basis points

at 2.849%, after hitting 2.929%, their highest since October

2023.

They jumped more than 30 bps on Wednesday, recording the

biggest daily rise since May 1997. Yields move inversely to

prices.

Markets trimmed bets on further ECB rate cuts after the

central bank said in its policy statement that its economists

now expect inflation to average 2.3% this year, reflecting

stronger energy prices.

Traders are pricing in an interest rate of around 2.08% in

December, from 1.92% late on Tuesday before

the German fiscal announcement.

Germany's 2-year yield, more sensitive to ECB

policy rates, rose after the rate decision and was last flat on

the day at 2.234%.

It jumped 22.5 bps on Wednesday, in its biggest daily

rise since March 2023.

($1 = 0.9244 euros)