"If the recent disturbances on the US interest rate market continue, we see no other possibility than the Fed stepping in with support purchases of American government bonds to stabilize the interest rate market", writes George Saravelos, global currency chief at Deutsche Bank.
The statement is made since mistrust of American assets as safe investments has begun to spread on the market and pushed up the 30-year interest rate in the US to as high as 5.02 percent on Wednesday – the highest level since November 2023.
Even the 10-year interest rate in the US is being pushed upwards rapidly right now, with a peak of 4.51 percent in Wednesday's trading. This can be compared to 3.94 percent last Friday last week.
Last time the Fed stepped in and made support purchases to secure liquidity on the market and access to credits was during the pandemic in 2020.
The US Finance Minister Scott Bessent downplays the significance of the strong interest rate movements and describes it as a normal adjustment on the bond market and not a systemic threat.
Saravelos, however, assesses the crisis as serious and believes that it cannot be solved in the long term as long as the Trump administration does not change its economic policy.
