They've fallen almost in sync, and now they've been rising around the world for three to six weeks: stock and bond prices.

In Germany, in the previous crash on the bond market, the current yield, i.e. the average yield on federal bonds across the entire range of maturities, rose to 2.35 percent.

This is the highest level since 2011 and shows that what was already apparent with the latest bond issues by the state-owned KfW Bank has become reality: the time of bonds with zero interest rates is over for Germany too.

Hanno Mussler

Editor in Business.

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Federal Finance Minister Christian Lindner (FDP), so far spoiled by the low-interest phase, now has to calculate with higher interest payments in the federal budget: after less than 4 billion euros recently, 18 billion euros are planned for this year, and even 35 billion euros in 2023.

Also because of the increased debt burden due to shadow budgets (credit-financed "special funds"), the federal government will have to make interest payments as high as ten years ago in the coming year.

Most recently, the federal government offered a coupon of 1.8 percent for a bond with a term of 31 years.

Despite the noticeable increase in interest costs for the federal government, the interest rate level in the euro area is not yet attractive for private investors, even if the annual inflation rate, which is currently around 10 percent, should fall to 5 to 6 percent in the coming year, as expected by the European Central Bank.

A major interest rate hike by the European Central Bank is expected this Thursday.

Anything less than a 0.75 percentage point rate hike would be disappointing for many market participants.

But even then, interest rates would be a long way from post-inflation positive levels.

Strongest crash since 1949

But dollar-denominated investors, who are the majority of the world, have broader concerns.

While it's somewhat common for stock indices to lose 20 percent every five to 10 years, that's unusual in the bond market.

Michael Hartnett, strategist at Bank of America, called this year's bond crash the "third major bond bear market" in stock market history.

According to his count, the first took place in the years 1899 to 1920, the second in the years 1946 to 1981. That year the global bond market suffered its biggest losses since 1949, when the Americans initiated the Marshall Plan for the reconstruction of Germany.

In this historic crash, some safe haven currencies appreciated sharply in 2022, above all the Swiss franc, the Israeli shekel and the dollar, which fell to par with the euro for the first time in a month on Wednesday.

Instead of a value of 1 dollar for 1 euro, however, the euro should cost closer to 1.40 dollars in terms of purchasing power.

From the point of view of investors who calculate in dollars, there is a chance that dollar exchange rates will normalize again at some point and that bonds in foreign currencies will gain in value as the dollar depreciates at slightly higher interest rates.

In addition, interest rate hikes are likely to continue on both sides of the Atlantic for the time being, even if they slow economic growth.

"Two unpleasant expectations will accompany investors at the end of 2022: the recession is coming and inflation will remain," says Ann-Katrin Petersen, Blackrock's capital markets strategist.

Many bond investors have therefore reduced the risks in their portfolios: shortened maturities, risky credit ratings and foreign currencies.

A historic crash on the bond market is behind us, from which some market participants also have to recover mentally.

Others, on the other hand, are already positioning themselves.