DThe prices of German Bunds fell significantly on Friday. The trend-setting futures contract Euro Bund Future fell by 1.04 percent to 150.98 points by the afternoon. In return, the yield on ten-year Bunds rose to 1.14 percent. This is the highest level since 2014.
On the market, the rise in yields was justified by the ongoing debate about monetary policy in the euro area. France’s head of the central bank, Francois Villeroy de Galhau, said that if there were no new economic shocks, he could imagine that the key interest rates in the currency area would be positive again at the end of the year. The deposit rate, which has been particularly important for a long time, is currently minus 0.5 percent. The main refinancing rate, which is currently less relevant, is on the zero line.
Meanwhile, yield spreads in the euro area continue to widen. In the morning, the interest premium on Italian government bonds compared to German government bonds with a term of ten years rose to a good two percentage points. This is the highest level in about two years. Experts have been pointing to rising interest rate differentials in the currency area for some time and justify the phenomenon with the gradual withdrawal of the European Central Bank (ECB) from the bond market. The ECB is currently reducing its purchases of securities step by step.
The US economy added more jobs than expected in April while the unemployment rate remained stable at low levels. Meanwhile, wages rose more slowly than expected. “The labor market is therefore proving to be robust,” commented the economists at Commerzbank. “In view of the persistently high demand for labour, the danger of a wage-price spiral is growing.” The US central bank is therefore stepping on the brakes more vigorously.
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