Government bond interest rates on the rise as inflation expectations rise, US New York industrial confidence fell sharply

Both long and short interest rates have been mostly rising today in both the US and Europe.

According to the figures published on Friday, US consumers’ inflation expectations are increasing, which has been reflected in upward pressure on US interest rates. The upward pressure is increased by the handling of the debt ceiling problem and the approaching “X date”, when the federal government’s solvency will be in such a bad state that it will have to default on its payments.

Today, the market is also expecting comments from several US Federal Reserve central bankers. As early as Friday, the Fed Philip Jefferson said according to CNBC that inflation is still too fast and there is still limited scope to curb it to the two percent target level. President of the St. Louis Fed James Bullard instead, he also said on Friday that it is very possible that the rate of inflation will continue to slow down.

At the beginning of May, the Fed raised its key interest rate by 0.25 percentage points. This withdrawal is expected to be the last.

Today, industrial confidence figures for the New York area were received from the United States. The index figure for May was -31.8, while a month ago it was 10.8. A negative number indicates a weakening of trust. The drop in the index was the biggest since April 2020. Immediately after the publication of the figure, the two-year interest rate, which is sensitive to US policy decisions, fell sharply after being on the rise for almost the whole day. However, the ten-year interest rate is rising.

At the time of the review, the two-year interest rate in the United States was 1.9 percentage points lower at 3.968 percent. The ten-year interest was 0.6 percentage points higher at 3.468 percent.

Interest rates in Europe have mostly been rising today.

Increased inflation expectations raised interest rates in Europe as well. European Central Bank Peter Casimir said on Sunday, according to Reuters, that the ECB may have to raise interest rates for longer than previously thought to contain inflationary pressures.

Italy avoided a downgrade by credit rating agency Fitch when Fitch announced on Friday that the country’s credit rating would remain at ‘BBB’. Danish Bank chief analyst Jens Peter Sørensen said avoiding a downgrade should have a positive impact on Italy’s interest rates, according to Reuters.

At the time of review, the Italian two-year was up 0.9 percentage points at 3.3 percent. The ten-year was down 0.9 interest points at 4.165 percent

In Germany, the two-year interest rate was down 0.3 percent at 2.57 percent, and the ten-year interest rate was up 1.8 percentage points at 2.29 percent.

In the foreign exchange market, the dollar has been in a slight decline today after strengthening strongly last week. The Turkish lira has weakened as Turkey’s presidential election heads into a second round.

At 15:47, the euro fetched 1.088 dollars, 147.67 yen, 0.869 pounds and 11.301 Swedish kronor. The dollar was 135.79 yen and the pound was 1.251 dollars.