May 2019 used to be the latest date, when it was last possible to buy a ten-year German government bond with a positive interest rate. Since then, it has been customary that whoever lends the federal government, has to pay them for it as well.
The situation in the European loan fund market seems to be returning to normal. That is to say, to a time when borrowers pay interest to their lenders in return for being able to borrow from them. On Wednesday, 19 January, the German Government’s ten-year bond traded at a positive interest rate again after almost three years. The market interest rate climbed to 0.025 per cent.
However, with German inflation having surged above the five per cent mark in December, the real yield on the government bond is still negative. However, experts say that this is an important signal which suggests that the period of negative nominal interest rates is probably over. This is despite the fact that the European Central Bank is still keeping its deposit rate in negative territory.
In short, it is precisely in response to high inflation that the market is reacting, and so lenders appear to have stopped being willing to lend at negative nominal yields. In addition, the European Central Bank has already signaled that it will gradually tighten its extremely lenient policy, which implies a rise in interest rates.