Frankfurt Last Thursday, the yield on federal bonds with a two-year term reached just under 3.4 percent, the highest level since 2008. This once again makes it clear that the years of negative interest rates are forgotten.
The bad news: Due to the recent inflation rate of 6.4 percent, the real returns calculated after deducting the price increase are still negative. The good news: If inflation falls further, this has a doubly positive effect for bondholders:
The yield is rising in real terms, and the nominal interest rate level is likely to fall again, which makes the paper with the higher conditions already on the market more attractive and drives their price up. Morgan Stanley therefore sees German government bonds as particularly promising over a twelve-month period – with a total return including price increases of a good nine percent.
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