The Effects of Rising Yields on Government Bonds: What You Need to Know

Yields on government bonds from Western countries are rising. What effects does that have?

Families, companies and governments lived in a world of free money for around ten years. That’s long gone; central banks are trying to counteract inflation with high interest rates. But this is putting some sectors under pressure. An overview:

property

For many consumers, mortgages are the first place where dramatic interest rate changes become noticeable. Many who have taken out a cheap loan are faced with a shocking increase in their monthly payments. This means that buying interest on the market is dwindling. The number of transactions is falling and property prices are under pressure. Banks are recording an increase in payment defaults.

burden on states

Higher interest rates also mean that countries have to spend more on borrowing. Example: USA: In the eleven months up to August, interest costs totaled $808 billion, around $130 billion more than in the previous year. The associated burden increases the longer interest rates remain high. In return, governments could be forced to borrow even more.