German government bonds rose sharply on Monday. By midday, for example, the trend-setting futures contract Euro-Bund-Future climbed by 1.3 percent to 135.54 points. The yield on ten-year German government bonds fell significantly to 2.31 percent. The trend was similar in other euro area bond markets.

The turbulence in the US banking sector continues to dominate the situation on the financial markets. At the weekend, the Ministry of Finance, the central bank and the deposit insurance authority said that deposits with the struggling bank SVB and another institution would be protected. The US Federal Reserve (Fed) launched a new loan program to provide banks with liquidity.

On the financial markets, this calmed the situation only briefly. The stock markets came under considerable pressure, while German government bonds, which were perceived as safe, rose. At the same time, expectations of the Fed's course were scaled back. For example, the major US bank Goldman Sachs no longer expects a further interest rate hike for the next Fed meeting in just over a week.

On the capital markets, the development caused considerable interest rate pressure. Yields fell significantly, especially in the shorter maturities. In the shorter maturity range, expectations of monetary policy usually have a stronger effect than in the longer maturities. Interest rate expectations for the European Central Bank (ECB), which will make its next decision this Thursday, also weakened in the markets.

Euro at highest level for a month

At the beginning of the week, the euro lost a large part of its daily gains by noon. The common currency cost 1.0667 US dollars on Monday afternoon, only slightly more than before the weekend. In early trading, the euro had risen to $1.0737, its highest level in about a month. The European Central Bank (ECB) had set the reference rate on Friday afternoon even lower at 1.0586 dollars.

The US dollar was under pressure against many other major currencies. The trigger is falling interest rate expectations for the US Federal Reserve due to the turbulence in the US banking sector.

In view of the turbulence surrounding Bank SVB, memories of the financial crisis of 2008 and the financial market near-death experience at that time are likely to be awakened, wrote foreign exchange analyst Ulrich Leuchtmann of Commerzbank. But the world is different today than it was then: "Politics, central banks and financial market participants have learned. In particular, instruments exist today to contain such crises." They would have had to be created in 2008 and beyond. And because they did not exist then, the contagion effects were higher then than they should be today.

On the financial markets, however, the situation calmed down only briefly. Stock markets continued to plummet amid continued turmoil in the US banking sector. As a result, demand for the dollar, which is regarded as an anchor of stability in turbulent times, has recently risen again.