The market anticipates the interest rate hike by the ECB and the 10-year yield is already above 2%
The market has been anticipating for some time that the interest rate hike by the European Central Bank (ECB) will come sooner rather than later in the organization’s fight against inflation. The first step up could come in July, once the Pandemic Emergency Purchase Program (APP) ends.
The Spanish government already assumed that the end of the incentives that have allowed us to continue to finance us cheaply in the market in recent years is near. And for this reason, both the Treasury and corporations have accelerated issuance, given the prospect that the rise in rates will increase their costs in the near term. In fact, it is something that is already happening.
In Tuesday’s latest issue, the Treasury paid for the first time in two years to post its 12-month bills. Specifically, the interest rate offered to investors was 0.078%, compared to the negative rate (-0.288%) applied at the last issue for the same maturity.
In fact, paying for debt issuance is an indicator of a return to normalcy in the face of the negative interest rate anomaly that has reigned in the markets in recent years, as central banks have extended their free liquidity limit to rescue the region’s economies.
According to data collected by Bloomberg, the value of negative-yielding bonds in the global market is currently about $2.5 trillion. It’s still a very high figure. But the lowest since 2015 and a long way from the 14 billion in mid-December.
And the tendency is for all that paper to leave the minus sign. Something that poses a serious problem for countries with greater fiscal imbalances such as Spain, due to the higher cost of issuing debt that finances, among other things, the government deficit.
Still, no damage to the title question is expected. The Treasury raised EUR 5,011 million, within the average range expected for the 12-month issuance. And it has maintained negative returns on shorter-term references. Over six months, it has charged investors a marginal rate of -0.310%, at least less negative than the previous -0.542%.
That same Tuesday, the yield of Spain’s ten-year debt again crossed the 2% threshold, which had been crossed yesterday for the first time since September 2015. The yield on the Spanish benchmark bond ended 2021 at 0.595%, after reaching negative levels in December 2020. In July 2012, it reached 7.739%.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
