DECRYPTION – German ten-year bonds are approaching positive territory due to persistent inflation.
Government bond interest rates kick off the year on a high. US ten-year Treasuries reached 1.8% on Monday morning, a level not seen since 2020, after rising by a quarter of a point in one week. The German Bund, negative since May 2019, is about to return to positive territory, at -0.03%.
Concretely, for two and a half years, investors had agreed to lose money to lend to the German state. It’s almost finished. As for them, the rates of French 10-year Treasury bonds had already crossed this symbolic milestone of a return to the positive as of September 2021, to find it since mid-December, after a brief foray below zero.
Why are the rates going up?
All of this is “A taste of what could follow in a year of high inflation and expected tightening of monetary policies”, according to Michael Leister, Head of Interest Rate Strategy at Commerzbank. “2022 will be a difficult year”, adds Antoine Bouvet, at ING. This…
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