German government bond prices have fallen more this week than ever in a month. As government bond yields rise, their prices fall. As interest rates fall, prices rise again.
The interest rate on the German ten-year government bond ended at about -0.47 per cent on Friday last week. Today at about 5:55 p.m., the interest rate was -0.43 percent. The corresponding rise in interest rates, ie the fall in prices, took place last in the week ending 5 June.
Often, as market uncertainty increases, investors sell relatively riskier stocks and buy government bonds that provide relatively safe returns. When the market receives positive news, equities often appear more attractive than government bonds.
This week, the development has been partly like this. For example, the Nasdaq, which describes the price development of listed companies in New York, has risen sharply this week, while government bond prices have fallen.
Although stock markets have risen and government bond prices have fallen, uncertainty continues to weigh on investors. The market has to consider whether more weight should be given to covid-19 infections or positive financial news.
Fresh “Positive” economic news came from the United States torstaina. The unemployment rate was at a historically high level of 11.1 per cent in June, but the news agency Bloomberg the economists ’forecast had collected an even worse figure of 12.5 per cent.
In the stock market, the news inspired investors and stock prices rose. On the other hand, there were no major changes in government bond prices and interest rates on Thursday, although in general, prices should fall and interest rates rise as stock prices rise.
The US ten-year government bond rate rose 2.3 basis points after the figures were released, up from a previous day’s close reading. By evening, the rise calmed down.
The interest rate on the German ten-year government bond ended up lower than Wednesday on Thursday, meaning that prices rose, even though the positive news could have thought of falling prices.
“It is illustrative that interest rates on important government bonds did not rise higher on the day that surprisingly positive labor market data came from the United States.” UniCreditin the analyst wrote to his clients.
According to the analyst, this underscores UniCredit’s view that US and German government bond yields will not rise and prices will fall very easily in the coming weeks.
Dutch financial institution ING estimates that the interest rate on the German ten – year government bond will fall to -0.50% in the near future. The underlying assumptions are the possible rise in covid-19 cases and growing market uncertainty.
Most recently, the interest rate on Germany’s ten-year government bond was in the readings forecast by ING around mid-May. In March, during the stock market crash, the interest rate was above -0.85 per cent.
Today at 6 p.m., the interest rate on Germany’s ten-year government bond was down 0.1 percentage point to -0.43 percent.
The interest rate on a similar loan in the UK was 0.7 percentage points higher at 0.19 per cent; The interest rate on the corresponding loan in France was 0.6 percentage points higher at -0.11%, the interest rate on the corresponding loan in Italy was 5.8 percentage points higher at 1.265% and the interest rate on the ten-year Spanish loan was close to yesterday’s closing reading of 0.44%.
At about 6:00 p.m.