Little Time? At the end of the text there’s a summary.
Have you noticed the crash? No? If so, you probably like most German Otto-Normal-savers. If the stock market is shaking, there is always great excitement in this country, although only one in fifteen German ever owns shares. In recent weeks, the earthquake took place, however, on another part of the financial market place, which affects many more people, but is hardly noticed by the public: At the market for government bonds prices fell suddenly within weeks dramatically. A government bond with a ten-year term of any lost from mid-April to mid-May, more than six percent. A few years ago such price falls were barely conceivable, the bond market was considered boring and relatively little movement.
This has now changed: In times when countries like Greece are threatened by bankruptcy and get involved, the major central banks with huge buy-back programs in the bond market, the movements have become more hectic
This will affect. interest rates, as the youngest Mini Crash shows: In mid-April, investors bought ten-year Bunds still practically at zero interest. A mere 0.05 percent return they demanded temporarily. This week they were against it for more than 0.7 percent. The yield has been so within one month about fifteen-fold. Only this Friday, they fell slightly
On Wednesday Finance Minister Wolfgang Schaeuble also got to feel the world changing interest: At the auction of ten-year bond, the federal government had the investors 0.65 percent return on offer – well 0,. 5 percentage points more than at the last auction a few weeks earlier. The higher interest rates mean for Schäuble several million euros higher costs.
If the movement stop, will that have an impact on ordinary depositors. Because interest rates on a daily or fixed deposits are based, among others, the bond yields. The interest rate of life insurance developed in the medium term according to the specifications of the bond market.
Is that so the turnaround, which again brought us higher interest rates? Most experts doubt that. They see the recent rise in interest rates above all a correction of the previously exaggerated low yields.
A super speculator Especially since it was clear as a trigger
that the European Central Bank (ECB) would buy a large scale government bonds of euro countries to the economy to bring in momentum, many investors have operated as freeloaders and also bought government bonds. The courses, the hope would inevitably rise if the central bank increases the demand. According to the German state would have to provide investors with low interest rates, his papers, he would by the ECB purchases going on anyway.
So it turned out. In early March, the ECB started with the bond purchases, yields fell to unprecedented lows, and many investors earned it vigorously money.
But apparently the Run was overdone on the bonds. If the financial markets are all run in the same direction and a so-called speculative bubble has formed, it often needs only a small trigger to explode this bubble. The delivered time the Americans Bill Gross.On April 21, the well-known as “bond king” fund manager called to bet against federal papers. The German government bonds were “the short of a lifetime,” tweeted Gross. So the chance of life. By “short” understand financial professionals a bet on falling prices. Many of you talked obviously to Gross’ advice.
So far, they were right. Who then put a lot of money on falling bond prices, has made a fortune in a few weeks,
In summary:. The German government bond yields have increased dramatically in recent weeks. Had the federal government investors in mid-April have hardly any more interest if he wanted to borrow ten-year money, there are now back around 0.7 percent. Should the development be prolonged, even ordinary savers could soon get higher interest rates again.
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