© Reuters. The profitability of European debt soars after reelection in the Fed
Madrid, Nov 23 (.) .- The profitability of European bonds soars again this Tuesday after the re-election of Jerome Powell as president of the US Federal Reserve (Fed), which, according to experts, drives expectations of interest rate hikes.
At 12.30 pm, the yield on the ten-year Spanish bond advanced almost 15%, to 0.477%.
In the previous day, after knowing the decision of the US Government to renew Powell’s mandate, the Spanish debt has already climbed almost 5%.
In the case of Germany, the ten-year bond, known as the “bund”, and considered the safest in Europe, also soared 16% this Tuesday, to -0.253%.
In the previous day, it added almost another 12% increase.
Income4 experts explain that Powell’s appointment for a second term at the head of the Fed – the first one ends in February 2022 – shows that the US prefers continuity at a “difficult” moment in the face of high inflation and a recovery of the labor market that is still incomplete.
In addition, they emphasize that his re-election accelerates the market’s expectations of interest rate hikes.
The market, they add, discounts a first rate hike in June 2022, with the possibility of a second in September and a third in December of the same year.
“This continues to drive up” the profitability of the debt, they conclude.
Likewise, IG analysts believe that Powell’s re-election reinforces expectations of an early reduction in stimulus.
In the US, ten-year bond yields are also rising, but to a lesser extent than in Europe. It adds up to 0.43%, above 1.6% (1.63%).
In the rest of the European countries considered peripheral, Portugal’s ten-year bond climbs 17.5%, to 0.406%; that of Italy, 6.6%, up to 1,018%, and that of Greece, 4.8%, up to 1,261%.
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