On Wednesday evening, the US 10-year yield rose again – to new levels since the previous peak in 2007. The “ten-year” is the nickname given to the interest rate on ten-year US government bonds, and is often referred to as In the name of “US government bonds”. As the most important interest rate in the world.
Credit expert Pall Ringholm previously said that the rise from the bottom of half a percent in 2020 was so rapid that you have to go back to the French Revolution to find a corresponding proportional increase. It has now risen further to 4.96 percent. It is not a given that the matter will stop there.
– A ten-year-old is very likely to exceed five percent, says SEB chief strategist Erica Dalsto.
Tonight, the market turned its eyes to New York.
Powell’s speech at 18.00 will be decisive for today’s interest rate developments. And now there are several Fed members who have come out and tried to speak out against rising long-term interest rates. Therefore, Powell is expected to support this message. There are almost extraordinary simultaneous connections regarding the development of long-term interest rates, says D’Alsto.
Jerome Powell is the CEO of the United States’ central bank (the Federal Reserve), which consists of 12 regional central banks, each with its own president. Tonight, Powell will speak at the Economic Club of New York. After this week, the Fed enters a quiet period during which it is limited in what it can say publicly.
– If Powell wants to send a different message before the interest rate meeting on November 1, this is his opportunity, says D’Alstow.
In the morning hours of Thursday, the ten-year-old’s rate was 4.97 percent – not far from five percent.
“I think there is a psychological limit,” says D’Alstow, but he adds:
– It does not change the outlook in this sense. The big question is whether the interest rate will remain at these levels for a long time or whether it is a temporary high level. She says that will be more important for markets.
According to the chief strategist, there are various factors that have pushed interest rates higher in recent days. D’Alsto believes this is partly driven by strong new headline economic figures from the USA, but also the risk of growing escalation in the Middle East has contributed to higher market interest rates.
Oil prices have risen about seven percent since the outbreak of the conflict about two weeks ago.
On the whole, it is the repricing of real interest rates that has pushed up long-term interest rates, says Dalsto.
The chief strategist believes that the fact that investors are raising long-term interest rates is a sign that the Fed is gaining more momentum for signals that the interest rate will be higher for longer. But it is also a result of growing attention to the US budget deficit. The United States may have to increase its lending in the market, which means there will be more government bond sales, which in turn could push interest rates higher.
Kelly Chen, macroeconomist at DNB Markets, also highlighted Powell’s speech as a highlight of the day. Like Dalsto, she points out that Fed members have endorsed that the recent rise in interest rates, and tighter financial conditions, are also having a tightening effect on the economy.
She says there is uncertainty about whether the December rate meeting will deliver a final increase, and believes the question now is how long interest rates will remain high.
– The answer seems to be: “Long.” Key figures from the US economy recently show that it has withstood interest rate hikes reasonably well, so expectations of imminent interest rate cuts are much lower as well, Chen says.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. No copying or other use of all or part of the Content may be permitted except with written permission or as permitted by law. For more terms see here.
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