The war in the Middle East has escalated again, pushing oil prices close to 100 dollars. This increase is generating new inflationary pressures that anticipate an interest rate hike in September, impacting mortgage credit, household savings, and business production costs. Investors fear that rising energy prices will fuel global inflation, which could lead central banks to raise interest rates.
Sovereign bond yields are surging in the Eurozone, the United Kingdom, and Japan, pressured by rising oil prices and expectations of further rate hikes by the ECB and the Fed. With the flight of investors and massive bond sales, debt yields have reached 15-year highs. The wave of sales on a global scale led, in early September, Germany's benchmark financing costs to the highest level in 15 years, with France, Italy, and the Netherlands recording equally sharp increases. Japan's 10-year government bond yield also reached 3% for the first time since 1996.
Portugal was not an exception, with debt yields reaching on Tuesday the highest value in a decade, with a rise of more than three basis points, the highest since 2017. However, the DBRS rating agency assures that Portugal is one of the least affected countries in the Eurozone, protected by positive dynamics in economic growth, indebtedness, and fiscal accounts. We are no longer part of the group of countries at risk for the euro, unlike the former PIIGS (Portugal, Italy, Ireland, Greece, and Spain). Now, other countries are being targeted, the so-called BIF (United Kingdom, Italy, and France).
Investors are demanding higher returns to hold public debt in a context of persistent inflation, expensive oil, and public accounts under pressure. Yields have reached levels that seemed distant just a few weeks ago, although they eased on the seventh day. Investors anticipate they will lose money on bonds purchased at lower interest rates and fear the ghost of stagflation. Debt markets are in great turmoil, with eyes on a bellicose White House, and alarms are sounding: the most likely scenario is having high interest rates for a long time.
