The theme of the market today seems to be the war in Ukraine. President Vladimir Putin the update of the core doctrine was followed by plenty of reactions in the stock, interest and currency markets.
Stock indices flashed green when trading started in the morning, but the color quickly changed to red. For example, the broad Euro Stoxx 600 was down 0.9 percent during the day compared to yesterday’s closing reading.
According to the doctrine signed by Putin, Russia can consider using nuclear weapons on looser grounds than before.
News agency According to Reuters it is Russia’s answer to the President of the United States to Joe Biden, which allowed Ukraine to use American long-range missiles in the war.
Ukraine used them for the first time today, the news agency Bloomberg reports, which will also affect the mood of the market together with Putin’s announcement.
Market rate (current yield): Describes the annual return. When the price of the loan paper decreases, the market interest rate rises, when the price of the loan paper increases, the market interest rate decreases.
Bond: An investor buys a 1,000 euro bond with an annual coupon rate of 2.0 percent. The market interest rate is (20/1000) 2.0 percent.
Example: The investor sells the loan to another investor for 1100 euros, which means the price goes up. The return level of the new investor is no longer 2.0 percent, because he bought the loan at a higher price, but receives the same coupon rate. The new market rate is (20/1100) approximately 1.8 percent.
Safe from government loans
The prices of government bonds are on the rise today, which Bloomberg, for example, explains with the increased concerns of investors. Government bonds are often in demand when risks increase.
For example, the market interest rate of the German ten-year government bond was 6.5 percentage points down to 2.3 percent, and the market interest rate of the corresponding French bond was 4.6 percentage points down to 3.0 percent.
When market interest rates fall, loan prices rise.
Germany’s two-year yield was down 6.5 basis points to 2.1 percent, and France’s was down 5.3 basis points to 2.3 percent.
The US ten-year was down 5.5 interest points at 4.4 percent and the two-year was down 5.9 interest points at 4.2 percent.
Safety sentiment supports the yen
On the foreign exchange market, the Japanese yen weakened yesterday as investors wondered whether the country’s central bank will raise interest rates in December. Today, the yen took back yesterday’s losses by strengthening strongly.
For example, against the euro it strengthened by 1.0 percent. You got 162.25 yen in euros.
Bloomberg reports that the yen started to strengthen strongly after the Putin news. According to the news agency, the yen often strengthens with geopolitical tensions.
The Swiss franc and gold, considered safe havens, strengthened like the yen.
Source: www.arvopaperi.fi
