{"id":9696,"date":"2026-01-20T12:23:20","date_gmt":"2026-01-20T11:23:20","guid":{"rendered":"https:\/\/pkfbofidi.com\/?p=9696"},"modified":"2026-01-20T12:23:20","modified_gmt":"2026-01-20T11:23:20","slug":"interest-rate-fluctuations-dont-forget-to-hedge-yourself","status":"publish","type":"post","link":"https:\/\/pkfbofidi.com\/en\/interest-rate-fluctuations-dont-forget-to-hedge-yourself\/","title":{"rendered":"Interest rate fluctuations? Don\u2019t forget to hedge yourself!"},"content":{"rendered":"

Current situation of the interest rate market & recent developments<\/h2>\n

According to the most recent macro economic forecasts, long term interest rates (for example the 10 year rate) have steadily risen in many eurozone countries. In the first half of 2026, they are expected to increase slightly further.<\/p>\n

Those same forecasts estimate inflation in the eurozone at around 1.7 to 2.0% for the coming years. This implies that monetary policy will remain supportive, but not necessarily through extremely low interest rates.<\/p>\n

In summary:<\/strong> we are no longer in the \u201czero\/negative interest rate\u201d regime of the past. Interest rates have risen, and the market mainly seems to aim for stabilization.<\/strong><\/p>\n

Expected developments in the short and long term<\/h2>\n

The expectation is that short term rates (ECB rate, Euribor, \u2026) will remain stable for the time being. The ECB aims for inflation around 2% over a horizon of one to two years.<\/p>\n

Markets currently estimate the likelihood of further significant rate cuts as limited, unless inflation structurally declines or the economy weakens substantially.<\/p>\n

For bond yields (long term rates), however, many analysts point to a return to the old normal:<\/strong> higher risk premiums, larger government debt positions, and a greater supply of bonds. This puts pressure on prices and pushes interest rates up<\/strong>. Concretely, a 10 year rate of around 3.30%<\/strong> is expected for 2026, possibly slightly higher.<\/p>\n

Although structural factors such as debt levels, budget deficits, inflationary pressures and reduced central bank intervention point toward higher long term rates, uncertainty remains. Depending on economic growth, inflation and monetary policy, interest rates may evolve in a volatile manner.<\/p>\n

In summary:<\/strong> Unfortunately, we have no crystal ball. But there are clear trends: short term stability, long term interest rate increases.<\/strong><\/p>\n

Implications for your company when making financing decisions<\/h2>\n

Given these interest rate expectations, several strategic considerations are relevant for your business:<\/p>\n

When short term (or short duration) financing is interesting<\/h3>\n

If short term rates remain stable (as expected), short term loans or credit lines remain relatively affordable. This is useful for working capital, seasonal fluctuations, temporary cash flow needs or flexible investments.<\/p>\n

If you expect the market to stabilize over time or to provide room again for interest rate reductions, a variable interest rate or flexible financing can be attractive without locking yourself in for the long term.<\/p>\n

When long term financing or a fixed rate is wise<\/h3>\n

If you are making investments with a long lifespan (such as machinery, real estate, fixed assets or capital expansions), fixing the interest rate for 5, 7 or 10 years can be appealing \u2014 especially given expectations that long term rates are more likely to rise than fall.<\/p>\n

A fixed interest rate provides predictability in costs and prevents unpleasant surprises later. This makes budgeting and long term planning easier, especially in an uncertain macro economic context.<\/p>\n

Timing & mixed strategy<\/h2>\n

Consider a mix of maturities:<\/em> for example, part of the financing short term (for liquidity\/working capital) and part long term with a fixed rate (for strategic investments). This spreads the risk while allowing you to benefit from both flexibility and stability.<\/p>\n

Assess the realistic financing need. Avoid borrowing \u201cjust in case.\u201d In a climate of (relatively) higher interest rates, interest costs are more burdensome than during previous low rate periods.<\/p>\n

Additional points of attention<\/strong><\/p>\n