Bonds and Commodities:Bond yields are picking up
Investors expect the ECB to raise interest rates by the end of 2022 and are selling government bonds. The yield on ten-year federal securities has risen to its highest level since May.
The euro started the new trading week stable on Monday. In the evening, the European common currency cost 1.1563 dollars, about as much as on Friday evening. Last week’s 15-month low at $ 1.1529 was therefore not far away.
On the raw materials market, the price of US WTI oil rose at times by 3.6 percent to $ 82.18 per barrel (159 liters), the highest level since November 2014. In the course of the economic recovery, coal and gas prices have also risen significantly making oil more attractive as a fuel for generating electricity and driving crude oil markets higher. According to stockbrokers, there is no end to the rally in sight. “The oil price is likely to continue to rise in the short term,” said Commerzbank analyst Carsten Fritsch.
The prospect of a tightening of monetary policy in the face of rising inflation put the bond markets under further pressure. Investors in the euro zone threw bonds from their portfolios; in return, yields increased significantly. The yield on ten-year government bonds climbed to minus 0.108 percent at the start of the week, the highest level since May. An interest rate hike by the European Central Bank by ten basis points by the end of 2022 is now fully priced in on the money markets. The expectation that the Bank of England (BoE) would raise interest rates well before the ECB also caused unrest in the bond markets. BoE executive Michael Saunders said a weekend newspaper report said households should prepare for a “much earlier” rate hike in the face of inflationary pressures. The yield on ten-year British bonds rose to 1.205 percent, marking the highest value since May 2019. Yields on US government bonds also rose significantly.
© SZ from October 12, 2021 / amon, Reuters, dpa