Interest Rates and Currencies: Middle East Crisis Raises Inflation Fears – Government bond interest rates are rising

The tense situation in the Middle East has increased investors' inflation fears. Tensions in the region escalated after Iran launched a missile attack on Israel.

Oil prices have already risen sharply on Friday. After the shock of the weekend, oil prices are actually falling on Monday. However, crude oil prices are likely to rise sharply if the situation continues to escalate.

The reason behind the reactions in the interest rate market is that inflation in the US has continued to be stronger than previously estimated. Among market estimates, expectations for a cut in policy rates have shifted from June to autumn. Some market analysts estimate that the U.S. won't even see a record number this year.

In the European market, expectations of key June interest rate cuts are still almost fully priced in.

The market is worried about a new wave of inflation

Government bond interest rates directly reflect expectations of policy interest rate changes and inflation.

“The market's quick reaction was to look for safe havens like government bonds. However, the concern now is a new wave of inflation. Head of fixed income strategy at Saxo Bank Althea Spinozzi told Bloomberg.

According to Spinozi, at worst, the interest rate outlook can change even in the medium term.

After 3 p.m., the benchmark interest rate on Germany's ten-year bond market was up 5.4 percentage points at 2.411 percent. The equivalent rate for the US federal government was 6.1 basis points higher at 4.583 percent.

On two-year loans, the German rate rose 5.2 percentage points to 2.899 percent and the US rate rose 5.2 percentage points to 4.948 percent.

See also  Klaus McKella to conduct the Chicago Orchestra

In the currency market, the euro is slowly rising after last week's sharp decline. The euro's decline began last week on Wednesday above 1.0850 euros. The Japanese yen fell half a percent against the euro and dollar on Monday.

At 3 p.m., the euro was at 1.0654 dollars, 163.97 yen, 0.85389 pounds and 11.561 Swedish kroner. The dollar is 153.91 yen and the pound is 1.2477 dollars.

Leave a Reply

Your email address will not be published. Required fields are marked *