Posted 7 Feb. 2022 at 18:41Updated Feb 7. 2022 at 19:12
Storm warning on the bond market. The debacle continued on Monday for government debt securities. The shock is particularly violent for southern Europe. The Greek 10-year rate took up 25 basis points (bp) in the afternoon, to reach 2.50%, and its Italian equivalent 10 bp, to 1.90%. Rates go up when the value of bonds goes down. Without being as impressive, this upward movement also concerned the German 10-year, now well established above 0%, at 0.23%, or the French 10-year. At nearly 0.67%, it is at its highest since January 2019.
This new blow of heat was in particular caused by a particularly aggressive declaration of a member of the Council of governors of the European Central Bank, Klaas Knot. The Dutchman said he expects a first rate hike “around the fourth quarter of this year” and a second hike will follow closely, probably in early 2023. The reaction was epidermal, for a market that already nervous by the Frankfurt institution’s recent change of tone in the face of high inflation in the eurozone.