Bond investors are prepared for the US Federal Reserve to tighten monetary policy.
At its interest rate meeting, the central bank decided to reduce its bond purchases from $ 120 billion a month in a timely manner.
Central bankers are under pressure to reconsider their view that the current surge in inflation is temporary.
Volatility has recently increased significantly on the bond markets.
Madeleine Brühl
Editor in business.
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Even if the yield on ten-year US Bunds recently fell back to the current 1.54 percent, it had previously risen by half a percentage point to 1.76 percent since the beginning of August. The markets are pricing in the fact that inflation will not be as temporary as previously assumed by the central bank, which makes a tightening of monetary policy more likely. “The big question will be whether they signal when rate hikes will begin,” said Jeanette Garretty, chief economist at Robertson Stephens Wealth Management. "I think they will try to avoid that."
In Europe, ECB President Christine Lagarde announced last week that she wanted to stick to the expansionary monetary policy. Here, too, the markets are pricing in a different scenario. “Concerns about stagflation are increasing on the bond markets, which is reflected in rising inflation and interest rate expectations,” explains bond analyst Hauke Siemßen from Commerzbank. Lagarde's signals could not have taken the wind out of the sails of this dynamic. The ECB President emphasized again on Wednesday in Lisbon that it was very unlikely that the conditions for an interest rate hike in the coming year would be met. The yield on ten-year government bonds fell to minus 0.181 percent by Wednesday, and last Friday it was minus 0.11 percent. An end to the expansionary monetary policy is therefore also viewed with concern,because only private investors remain as buyers for government bonds. Bloombergan analysts assume that rising yields could then force the ECB to abandon its plans.