2023-10-23 17:00:23
The profitability offered to investors by the 10-year bond of the United States Treasury climbed above the 5% threshold this Monday for the first time since July 2007, before the outbreak of the great financial crisis, given the prospect of a period prolonged high interest rates. In this way, the interest on the 10-year US bond rose to 5.025%, while the yield on the 30-year bond also exceeded the 5% barrier, also returning to the levels of the summer of 2007, notes Europa Press.
The president of the US Federal Reserve, Jerome Powell, warned last week that the path to return inflation to the 2% target will probably “take a while” and will be “bumpy”, because monetary policy is not yet what it is. restrictive enough and there is a risk that “doing too little” could allow above-target inflation to “entrench”, while “doing too much could unnecessarily harm the economy”.
Likewise, a series of recent data has suggested that the US economy is in good health, despite the rise in interest rates, after retail sales increased 0.7% in September compared to the previous month, just one tenth less than the increase in August, completing six consecutive months of expansion, while the Bureau of Labor Statistics of the US Department of Labor reported that the interannual inflation rate in September repeated the same increase as August, of 3.7%, when the market consensus anticipated a slight relief in the rise in prices.
In this sense, Bert Flossbach, co-founder of the management company Flossbach von Storch, pointed out that investors are beginning to adapt to a longer period of higher interest rates, after, in their latest projections, the members of the Board of the US Federal Reserve expect interest rates to remain above 5% until the end of 2024. “The underlying assumption is that the level of interest rates reached now still needs time to develop its slowing effect on the economy and inflation. This points to a cooling of the global economy, as similar effects are expected in Europe and the Chinese economy is also growing much more slowly. In addition, rising interest rates reduce consumers’ spending and investment possibilities.” .
On the other side of the Atlantic, the secondary debt market also reflected the pressure on sovereign bonds in the Old Continent in anticipation of the European Central Bank (ECB) meeting on Thursday. Thus, the profitability of the ‘bund’, the German bond with a maturity of 10 years and the reference for the rest of European issues, approached the 3% threshold by reaching an intraday maximum of 2.960%. Likewise, in the case of the 10-year Spanish bond, the yield continued to move upward and was above 4%, while in the case of the Italian debt the yield climbed to 4.936%.
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