For years, the bond market has only moved in one direction: down.

Interest rates were low or even negative.

But investors could recently rub their eyes in amazement: because interest rates are rising and rising.

The yield on 10-year Bunds was almost 0.27 percent this week.

For the first time since May 2019, there will be interest rates again this year, it is the highest level in three years.

Franz Nestler

Editor in Business.

  • Follow I follow

The reasons for the rise in interest rates are well known.

The ECB did not announce any immediate measures last Thursday.

But the interpretation that inflation will eventually reach a higher level again is slowly gaining ground.

In addition, the Bank of England has already raised interest rates twice, and the US Federal Reserve will start raising interest rates in March.

The ECB will not be able to ignore this sooner or later.

The development is therefore already priced in for eurobonds.

Beware of exchange rate risk

For investors, this means that bonds are increasingly becoming an option again.

Basically, bonds in a portfolio have the task of being a safe haven in contrast to stocks.

The lower the interest rates, the lower the risk.

This means that investors are assuming higher risks because of rising interest rates.

But these are still negligible in this country, so it's really almost all about value retention.

If higher returns are desired, investors outside the eurozone will find them, for example in Great Britain or the United States.

But be careful: Of course, there is always an exchange rate risk here – possible interest rates could be eaten up directly by unfavorable exchange rates.

If you like it even more risky, you can of course also rely on issuers with weaker credit ratings.

Conversely, this also means that the risk of default is greater.

The credit rating is not weak for nothing.

Subordinated debt holders are also rewarded with higher interest rates.

But in the event of insolvency, creditors are treated subordinately - hence the name.

Finally, there are convertible bonds.

These grant the holders the right to exchange the bond for shares in the company at a fixed price and within a clearly defined period of time.

Keywords: