Anyone who believed that the interest rate turnaround by the European Central Bank (ECB) would mean that capital market interest rates and building interest rates in Germany would continue to rise in the new year was mistaken: the yield on the trend-setting ten-year federal bond has fallen from good since the beginning of the year 2.5 to just over 2 percent.
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With it, the building interest rates, which are based on it, have fallen again, from at times more than 4 percent for building loans with a ten-year fixed interest rate to around 3.6 percent most recently.
Numerous different factors affect the yield on the bond, so that the forecasts of the banks as to how things will continue are quite different.
In a survey conducted by the FAZ among around two dozen financial companies at the end of last year, the forecasts for the yield on federal bonds at the end of 2023 were between 1.5 and 3 percent.
Even now there are very different opinions.
Commerzbank speaks of a “false start”
"The broad rally on the bond market that we are expecting for later in the year already seems to be in full swing," says Rainer Guntermann, bond specialist at Commerzbank.
"However, we would not extrapolate the trend of the first few weeks of the year to the next few months."
From his point of view, it looks more like a "false start", as was observed last summer or autumn.
"Inflation is falling, but in line with expectations, while the underlying price pressure in the euro area will probably continue to rise over the next few months," said Guntermann.
Not much is likely to change in this regard any time soon, since the economic forecasts are being raised more and more.
Since the European Central Bank (ECB) is showing determination to stick to a series of interest rate hikes of 0.5 percentage points and the bond supply wave is not abating, Commerzbank assumes that the yields on ten-year Bunds should not fall below 2 percent for the time being.
"Towards the end of the first quarter, we expect a return of 2.35 percent," said Guntermann.
In the second half of the year, however, he believes that yields will fall noticeably if inflation also falls and the ECB does not raise interest rates any further: "We expect the ten-year Bund yield to be 1.8 percent at the turn of the year."
What happens in the second half of the year?
Holger Schmieding, the chief economist at the Hamburg bank Berenberg, calculates differently.
He believes that the financial markets are currently pricing in interest rate cuts by the ECB in the second half of the year – and wrongly so.
"I expect the return to increase further over the course of the year, to around 2.7 percent at the end of the year," said Schmieding.
The rate hikes by the ECB are largely priced in.
But the market expects the central bank to cut interest rates significantly again in late 2023 and 2024.
"We think that's unlikely," Schmieding said.
Instead, the ECB will at most reduce its key interest rate slightly in 2024 and control its monetary policy in such a way that the short-term money market rate will remain close to 3 percent in 2024.
"Since hopefully no new geopolitical catastrophes will drive investors to the safe haven of Bunds, the yield at the long end should settle closer to 3 percent than 2 percent."
Since the American central bank will lower its key interest rate much more, he believes that the yield gap between American and German bonds will narrow.
Further interest rates between 3 and 4 percent expected
For the construction interest, this means first and foremost a further up and down, say the construction financing experts from the credit broker Interhyp.
"We are currently observing strongly fluctuating interest rates again," said board member Mirjam Mohr of the FAZ
This development is primarily related to the ECB's attitude to tightening monetary policy in the long term, which it is demonstrating, for example, with the gradual reduction in bond purchase programs: "We expect construction interest rates to be between 3 and 4 percent."