Yield on ten-year US government bonds exceeds five percent

The sell-off in global government bond markets continues. In the USA, price losses continue, but in return the yield on ten-year bonds climbed to 5.025 percent on Tuesday morning - the highest level since the 2007 financial crisis.

The yield on ten-year US government bonds has already risen by more than one percentage point since the start of the Iran war at the end of February. High interest rates are a huge problem for governments as they make it much more expensive to take on new debt.

The background to the sell-off in bonds is inflation concerns as a result of the Iran war. As consumer prices rise as oil prices rise, economists expect higher and longer-lasting inflation as well as rising key interest rates from central banks. While the European Central Bank recently raised key interest rates, the US Federal Reserve Bank is also expected to raise interest rates this Wednesday.

There are also concerns about growing debt in some industrialized countries, especially the USA. The mountain of debt there recently exceeded the $40 trillion mark.

Yields on federal bonds are rising - consequences for builders

The euro zone and Germany are also affected by the crisis on the bond market: the yield on trend-setting ten-year federal bonds rose to 3.57 percent on Tuesday, reaching a multi-year high. At the end of February it was only around 2.6 percent.

The increase has consequences for property buyers and builders in Germany, as building interest rates are based on ten-year federal bonds. Most recently, interest rates for construction financing with a ten-year fixed interest rate rose to around 4.25 percent annually, wrote the analysis firm Barkow Consulting. That is 0.60 percentage points more than at the end of June and the highest level since May 2011.

Since builders and home buyers usually finance large sums of money with loans, even small surcharges can become expensive and ruin plans. Experts believe further interest rate increases are possible. “We are slowly approaching the possible 4.5 percent for building interest rates,” writes Max Herbst, founder of the Frankfurt-based FMH financial consultancy.