INTEREST RATES AND CURRENCIES: US government bond prices rise – “Employment data is on the weaker side”

US government bond prices were on the rise on Thursday. The prices of government bonds started to rise at the same time as the futures contracts predicting the development of the US stock market turned down after around 14:00.

According to the Bloomberg news agency, the background was a large number of unemployment compensation applications, but the information came only after the direction was reversed at 3:30 p.m.

The market rate of the US ten-year government bond was 6.8 percentage points lower at 4.21 percent. The two-year was down 7.2 percentage points at 3.48 percent.

The ten-year was at its highest at 4.29 percent and the two-year at 3.61 percent this year after mid-January. Market interest rates rose when it was estimated that the loans were under selling pressure.

The price development of government bonds is monitored with market interest rates. When market interest rates rise, their prices fall, which means they are subject to selling pressure.

The development of government bond prices is influenced by the central bank’s monetary policy. If the central bank lowers the interest rate, bonds issued in the future can offer a lower interest rate.

In such a situation, old bonds can look more attractive than before.

According to the interpretation of the news agency Bloomberg, unemployment compensation applications increased the probability that the Federal Reserve may have to lower key interest rates this year.

Securities broker AmeriVet Securitiesin Responsible for US trade and strategy Gregory Faranello commented to Bloomberg that market interest rates can still move downwards.

“There is no question that the employment data is on the weaker side,” Faranello commented in the Bloomberg news.

In Europe, the prices of government bonds were also rising gently. For example, the market interest rate for the German ten-year bond was 1.9 percentage points lower at 2.84 percent, and the two-year loan was 0.6 percentage points lower at 2.08 percent.

More unemployment benefits were applied for than expected

According to the US Department of Labor, 231,000 new unemployment claims were filed last week. The median of economists’ forecasts expected a gentle rise to 212,000 applications from the previous week’s 209,000 applications.

The recent reading exceeded the forecasts of all economists. The forecasts are based on data from the news agency Bloomberg. The numbers were published at 3:30 p.m.

Bloomberg estimates that the cold weather conditions have brought interruptions to companies’ business operations, which may have caused Americans to apply for unemployment benefits more than before.

On the foreign exchange market, the euro weakened slightly against the US dollar. In euro, you got 1.1788 dollars.