Tension returns to the debt market as investors already count on 4% interest rates
The heavy weight of the banking sector in the Spanish stock market allowed the Ibex-35 to avoid the red numbers registered in the rest of the European prosecutor’s office. The index rose 0.86% to nearly 9,394 points, with a cumulative recovery of almost 4% in February. This is the highest level in the last three years, in February 2020. It’s just before the outbreak of the pandemic, but it’s still a long way from the 10,000 points seen back then.
The main culprit behind Tuesday’s increases was Banco Santander, which shot up 4.79% to EUR 3.72 per share after holding Investor Day, where the entity announced an improvement in its payout (percentage of profit). that goes to dividends) up to 50%, from the current 40%.
The rest of the banks joined the Cantabrian entity in the increases, with increases of more than 2.5% for Unicaja and BBVA, 2.2% for Sabadell and Bankinter and 1.3% for CaixaBank.
It is not only about the ‘domino effect’ caused by Santander, but also about investors’ increasingly clear perspective on the future of interest rates. And it is that the market is becoming increasingly clear that central banks will be forced to keep raising interest rates and keeping them high for longer in order to cope with inflation that turns out to be more stubborn in 2023, much stronger than expected.
This is evidenced by CPI data released on Tuesday in Spain and France, which surprised with fresh increases, reigniting fears of tighter monetary policy.
This expectation of additional rate hikes – which banks benefit from by improving their margins – has again raised the possibility that both the Fed and ECB are being too aggressive, causing a hard landing in economies that have them, at least for now. spared from the recession.
In this scenario, investors have been triggering bond sales over the past few days, putting downward pressure on prices and increasing profitability (which moves in reverse). In Europe, one of the hardest hit is the main market benchmark, the 10-year German bond, whose yields are already above 2.63%. Those levels have not been seen since 2011. And the Spanish bond has risen above 3.66% for the first time since February 2014.
Meanwhile, a barrel of Brent in the commodities market was up 1.80% to $83.93, while US West Texas rose more than 2% to $77.41.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
