Bond market trends: vaccine news briefly drives up interest rates
The interest rates for reference bonds in Germany and the United States rose due to the news of effective vaccines. The German 10-year rate rose to -0.45% during the month, and the American rate remained only a few base points below 1.0%, a level not reached since March. Government bond rates fell slightly again in the second half of the month. From a market perspective, monetary policy will remain very loose for years to come, even if the economy improves following the deployment of the vaccine. All in all, the movement in rates over the month remained virtually unchanged.
In Europe, Hungary and Poland's veto against the multi-year budget and the stimulus plan had little impact on the markets. The spreads of the southern countries of the eurozone reduced further. The 10-year government bond rate from Spain and Portugal is nearing zero percent.
In this climate of risk-taking on the markets, the spreads of corporate bonds dropped again and are now close to their pre-corona level, both for quality bonds (‘investment grade’) and ‘high yield’. But the underlying picture is not that unambiguous: companies that are hardest hit by the pandemic (cyclic sectors, leisure etc.) still report spreads that are considerably higher than their pre-corona levels.