INTEREST RATES AND CURRENCIES: Loan prices rise, the dollar weakens

Government bond prices were on a moderate rise on Monday. President of the United States Donald Trump announced over the weekend that it was planning tariffs for Finland and seven other European countries.

The countries in question sent a few soldiers to Greenland when Denmark asked for support to defend the autonomous region. For example, two soldiers were sent from Finland.

The market rate of the German ten-year government bond was 0.4 percentage points lower at 2.83 percent, and the two-year bond rate was 3.4 percentage points lower at 2.07 percent.

An interest point is a hundredth of a percentage point.

When market interest rates fall, their prices rise. The market rate describes the yield level obtained from the loan and not the annual interest paid on the loan paper, which always remains the same.

If an investor buys a bond at a higher price than a previous investor, his rate of return decreases because he pays more for the interest on the bond. When the price goes up, the market interest rate goes down, and when the price goes down, the market interest rate goes up.

The dollar is weakening

The rise in government bond prices on Monday can be explained by the fact that investors are parking their money in relatively safe investments. The stock market was falling in Finland and elsewhere in Europe.

The French ten-year was down 2.2 interest points at 3.49 percent and the two-year was down 3.0 interest points at 2.24 percent.

In the United States, stock and interest markets were closed for Martin Luther King Day. Interest rates on loans have risen in the United States this year, as Trump has tested the independence of the Federal Reserve.

On the foreign exchange market, the euro strengthened gently against the dollar.

Around 17:17, the euro fetched 1.1638 dollars, 183.78 Japanese yen, 0.86702 British pounds and 10.719 Swedish kronor.

The appointment of the head of the Fed is approaching

President Trump has said that he will appoint a new head of the Federal Reserve (Fed) in the coming weeks.

The current CEO Jerome Powell the term of the general director ends in May.

Trump has not liked the Fed’s monetary policy. In his opinion, the central bank should have lowered the key interest rate so that people could afford to spend and companies could invest. The Fed, on the other hand, has taken care of the rise in prices, which is prevented by keeping interest rates higher.

Central banks have enjoyed extensive independence in Western countries in recent decades. Now Trump has tested independence.

At the beginning of the year, the US Department of Justice delivered a summons and threat of criminal charges to Powell, according to which the threat of charges is a result of the Fed’s independent monetary policy.