Global market interest rates are rising sharply – the Riksbank warns

It's going like a plague right now. Long-term market interest rates are rising sharply in several countries. It is about interest rates on government bonds that are traded on a gigantic global market.

A heavy example is the American ten-year interest rate. On Thursday, it was up to 5.20 percent – ​​the highest level since the financial crisis in 2007. On Friday, it retreated slightly to 5.17 percent. But the rise in three days is 21 so-called interest points (hundredths of one percent). A great shot in this context.

The interest rate on 30-year bonds was up to 5.47 percent on Friday. The highest level since 2004.

Other countries such as France, Germany and Japan have also recorded gains this week. Like Sweden.

- There seems to be a lot of pain in the bond market, an economist commented on the events to the Financial Times newspaper.

The trend has been going on for a long time and has several explanations. The risk of inflation picking up again as a result of the war between the US and Iran and high oil prices is one. This means that those who are going to lend money to the states want a higher interest rate.

Another explanation is that the companies investing in AI need to borrow money for their investments, which increases competition in the interest rate market.

The sharp rises have caused the Riksbank to take an extra look at the phenomenon. An analysis was presented in its latest economic forecast that came out on Thursday. The head of the Riksbank, Erik Thedéen, also raised the topic at the press conference in connection with the interest rate announcement.

- States in many parts of the world have large borrowing needs. Japan, France, USA, Germany to name a few. Some are beginning to reach levels where their public financial credibility is being questioned. This also contributes to long-term interest rates rising, said Erik Thedéen.

- There is competition for capital on the world's capital markets, he stated.

In its analysis, the Riksbank notes that the Swedish ten-year interest rates on government bonds have risen by approximately 0.7 percentage points.

"The Swedish economy is still affected by the recent rise in long-term interest rates," writes the Riksbank.

Sweden has an advantage in this context.

"Since many Swedish borrowers have short fixed interest periods, changes in long-term interest rates have a less direct effect on their interest expenses than changes in short-term interest rates," writes the Riksbank.

But the Riksbank points out at the same time that higher long-term interest rates can affect the economy through other channels.

"Higher interest rates can tighten financial conditions by putting pressure on the valuations of shares, real estate and other assets with a long duration," writes the Riksbank.

- This is definitely something that you have to be vigilant about, emphasized Erik Thedéen at the press conference.

Another risk is that companies become more cautious.

"For companies, higher interest rates mean that the return required for an investment to be profitable rises, which means that fewer investment projects are carried out," writes the Riksbank.