The prospect of interest rate hikes in the face of rising inflation put government bond markets under renewed pressure at the beginning of the week. “Inflation concerns investors in Europe, which increases the pressure on the European Central Bank to tighten monetary policy,” said Susannah Streeter, an analyst at brokerage firm Hargreaves Lansdown. Rising energy prices could force the ECB to take action against inflation, said ECB Director Isabel Schnabel at the weekend. The European Central Bank’s loose monetary policy has recently come under increasing criticism. In the US, investors expected a first rate hike from the US Federal Reserve in March, said analyst Jochen Stanzl from online broker CMC Markets.
Against this background, investors parted with government bonds. In return, the yield on ten-year US bonds rose to a two-year high of plus 1.808 percent. At minus 0.025 percent, their German counterparts returned as high as they were last two and a half years ago. In the case of US bonds, however, the end of the flagpole is far from being reached, forecast economist Nicholas Farr from the research company Capital Economics. “The market still seems to underestimate how much the Fed’s key rate will rise in the coming years.” He therefore sees the return on ten-year T-bonds at 2.25 percent at the end of 2023.
On the foreign exchange market, the euro fell 0.3 percent to $ 1.1322. Traders justified the weakness of the common currency with the speculation of imminent rate hikes in the USA, which heaved the greenback upwards. The cyber currency Bitcoin temporarily fell below the $ 40,000 mark for the first time since September. Other major digital currencies like ether also came under pressure. Here, too, the weakness in the share price was justified by US monetary policy.