Price and interest rate fluctuations remain enormous on the bond markets.

Recently, bond prices have come under pressure due to inflation concerns and the expectation of further interest rate increases in Europe and the United States.

As a result, market interest rates for government bonds rose significantly.

On Friday, the yield on the 10-year Bund rose to over 1.2 percent after temporarily falling below 0.7 percent in early August.

The yield is still far from the eight-year high of more than 1.9 percent reached in mid-June.

Markus Fruehauf

Editor in Business.

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Commerzbank analyst Hauke ​​Siemßen assumes that fears of recession would prevent a further rise in yields.

He attributes the latest developments on the bond market to concerns about inflation.

In the euro zone, inflation reached a record 8.9 percent in July.

On Friday, the increase in producer prices in Germany made it clear how high the price pressure is.

Producer prices increased at a record pace by 37.2 percent in July.

In view of the ongoing inflationary pressure, Isabel Schnabel, member of the Executive Board of the European Central Bank (ECB), spoke this week for another "big" interest rate hike in the coming month.

In the July meeting, the Governing Council of the ECB raised the deposit rate by 0.5 percentage points to zero percent due to the risk of inflation, although the prospect of an interest rate hike of only 0.25 percentage points had previously been announced.

Inflation well above 2 percent by the end of 2024

The markets doubt that the ECB will come close to its inflation target of 2 percent in the foreseeable future.

In a survey published on Friday by the Mannheim-based economic research institute ZEW, the financial market experts surveyed expect that the inflation rate in the euro area in the period from 2022 to 2024 will exceed the ECB inflation target more significantly than previously assumed.

Median inflation rates of 7.5, 4.5 and 3.0 percent are expected for 2022, 2023 and 2024, respectively.

In May 2022, according to the ZEW, the corresponding forecasts were still 6.3, 3.5 and 2.5 percent.

In particular, the development of energy and raw material prices as well as wages in the euro area, but also the monetary policy of the ECB have led to the increased inflation expectations.

Only the economic development in the euro area is currently seen as slowing down the development of inflation.

Commerzbank analyst Siemssen expects increased recession worries in the coming week, when the purchasing manager indices, which are considered important barometers of sentiment, are likely to fall in Europe and the United States.

Yields on US government bonds have also recently picked up again.

The 10-year Treasury neared the 3.0 percent mark on Friday.

Representatives of the US Federal Reserve are not willing to neglect the fight against inflation risks because of concerns about the economy.

Saint Louis Branch Fed Chairman James Bullard told The Wall Street Journal that he favors a 0.75 percentage point hike in interest rates at the next Fed meeting in September.

The Fed had already raised interest rates by 0.75 percentage points in June and July.

It is now in a range of 2.25 to 2.50 percent.