Interest rates on government bonds from the United States and Europe have risen sharply in recent days. The interest rate on 10-year Dutch government bonds rose to nearly 3.3 percent. “I have a feeling it’s an overreaction as well,” says Steven Brackmann, professor of international economics at the University of Groningen.
The idea behind increasing interest rates on government bonds is the suspicion that more inflation may be on the way. This is also the main reason why stock markets have been declining for some time. “It started with a huge shock to investors when the Fed said interest rates could stay very high for a while,” Brackman explains.
“It’s as if investors suddenly woke up.”
Investors want to compensate for risk and higher inflation, and now they are suddenly responding. Brackman thinks this is understandable, but he also calls it “wonderful” that people are now waking up to this possibility. After all, central banks have been raising interest rates and warning about rising inflation for some time. It’s as if investors suddenly wake up and think: Yes, this inflation is actually very annoying. I have a feeling it’s an overreaction too.
Read also | Economic uncertainty high and ‘signs of weakness and stress’
Member States of Southern Europe
Rising bond yields are particularly bad news for countries with large national debts, such as EU member states in southern Europe such as Spain, Italy and Greece. These large government debts must be refinanced from time to time. “Then they are looking for higher interest rates and that is annoying. These countries will suffer from this more than countries like the Netherlands and Germany.”
Read also | “Investors expect interest rates to remain above five percent.”
