The interest rate on Belgian long-term loans fell below zero for the first time in history. The demand for government paper, which is seen as a safe haven, is increasing due to concerns about a cooling world economy, the trade conflict and the expectation for a more flexible monetary policy in the United States and Europe.
At around 8.30 am, the Belgian ten-year interest rate stood at minus 0.022 percent. In Germany, France, Finland, the Netherlands and Austria, the long-term interest rate is also negative and the lowest levels have ever been tightened regularly. The interest rate and the value of a bond move in the opposite direction. Falling returns indicate an increasing value and an increasing demand for the debt paper.
Interest rates on European government bonds are falling, partly due to the announcement that IMF director Christine Lagarde has been nominated as the new president of the European Central Bank (ECB). She is to succeed Mario Draghi, who will resign as President of the ECB at the end of October. It is expected that Lagarde will continue Draghi’s flexible monetary policy. The ECB may also come up with an interest rate cut this year.