The ten-year yield of the German Bund has become positive for the first time since 2019


German 10-year bond yields, a measure of eurozone-wide borrowing costs, have swung above zero for the first time since 2019 as investors bet that central banks will have to withdraw stimulus measures to slow inflation.

Yields on the 10-year Bund rose as much as 0.009 percent on Wednesday, the highest level since May 2019, reflecting a drop in the price of debt. In mid-December the yield of the Bund had registered about minus 0.4 percent.

The global increase in yield, led by the US, reflects investor concerns that policymakers will need to act quickly to cool the intense price growth that has gripped large economies.

Inflation in the eurozone climbed to 5 percent in December, setting a record since the creation of the single currency more than two decades ago and casting doubt on how much price pressures will ease this year.

At a meeting in December, the European Central Bank announced it would continue to buy assets after its emergency bond purchase program expires in March, but at a slower pace than investors expected.

That, combined with the signs that the United States is approaching stricter policy, increased yields on German bonds.

Across the Atlantic, the yield on two-year U.S. government bonds, which is considered particularly sensitive to changes in monetary policy expectations, hit 1 percent on Tuesday, for the first time since February 2020, as the Federal Reserve increased prices in four-year markets this year.

The sell-off of government debt also highlighted investors’ belief that the Omicron coronavirus variant would fail to disrupt the global economic recovery, potentially giving central banks a chance to give up buying and raise interest rates.

More to come. . .


Source link

Leave a Comment