At the beginning of the week, it was less than three basis points or 0.03 percentage points that were between the yield on ten-year Bunds and the zero percent mark.

Concerns about inflation and the expectation of significant rate hikes by the US Federal Reserve (Fed) in the near future caused yields on the bond market to rise and thus pushed prices down.

This drove the yield on ten-year government bonds down to minus 0.026 percent, the highest level since March 2019. At that time, the ten-year yield on German government bonds, which is the reference interest rate for the euro area, was most recently in positive territory.

Markus Frühauf

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The yield on ten-year US government bonds also climbed to 1.8064 percent, the highest level since the beginning of 2020. The yield on five-year government bonds in Great Britain broke the 1 percent mark for the first time since March 2019. The market is still focused on the exit plans of the central banks, was the assessment of Commerzbank analyst Rainer Guntermann. In his opinion, if the US inflation rate was above 7 percent in December, there should be no easing for the time being.

The director of the European Central Bank (ECB), Isabel Schnabel, also contributed to the fears in the markets about a faster exit by the central banks from the expansive monetary policy. It expects the “green” transition to a sustainable economy with a view to energy prices upside risks for medium-term inflation.

"The recently observed increase has already brought the yield on ten-year Bunds within sight of the magic zero," said Michael Hünseler, bond portfolio manager at MEAG, the asset manager at Munich Re.

The combination of high inflation and energy prices, a noticeable recovery in the labor market and persistent supply chain problems have recently also shaped the communication of the main central banks.

In the US, several interest rate hikes can now be expected this year, and earlier than previously assumed.

Signal effect for Europe

This will be successively priced in by the bond markets and will not remain without a signal effect for Europe.

"Without a slowdown in price increases - unlike a year ago - it can be assumed that this trend will continue for the time being and that longer-dated Bunds will also return positive returns this quarter", expects Hünseler.

The monetary policy meetings of the Fed are scheduled for the coming week, followed shortly after by the ECB.

David Kohl, chief economist at Bank Julius Baer, ​​believes that there are good reasons for a stronger throttling of bond purchases in the US and for an emerging exit from the emergency bond purchase program in the euro zone (PEPP).

A large proportion of the liquidity created by the central banks is returned to their accounts.

In contrast, there are fewer good reasons for tightening monetary policy through higher interest rates to combat high inflation.

Because delivery bottlenecks and high oil prices cannot be eliminated through higher interest rates and a tighter monetary policy, Kohl points out.

Should the Fed or the ECB try to do this, economic momentum is likely to slow down considerably.

The chief economist of the American investment bank Goldman Sachs, Jan Hatzius, is now expecting four rate hikes by the Fed.

According to a study published over the weekend, the first rate hike should take place in March.

The head of the regional central bank of Richmond, Thomas Barkin, had already announced on Friday that a first rate hike in March was conceivable.