Inflation in the eurozone and the USA is on the retreat - and expectations of interest rate cuts have solidified. Corporate bonds from well-known names remain in demand, but some bonds also suffered significant price losses.
2 February 2024. FRANKFURT (Börse Frankfurt).
It was another week dominated by the central banks, this time the US Federal Reserve. On Wednesday, Fed Chairman Powell emphasized the positive inflation trend and left interest rates unchanged - as expected. However, he also made it clear that an initial rate cut in March was unlikely, as inflation would first have to move towards 2% on a sustained basis. "That did surprise the market a little," commented Tim Oechsner from Steubing AG. However, interest rate expectations have not been shaken: "Fed Chairman Powell has described an imminent interest rate cut as unlikely, but this does not change the picture of an interest rate turnaround in the course of the year," explains analyst Ralf Umlauf from Helaba.
Nagel: "Two percent target within reach"
As far as the eurozone is concerned, Bundesbank President Joachim Nagel also gave the all-clear for inflation this week. He is convinced that the "greedy beast" has now been tamed. The two percent target is within reach. In fact, inflation in the eurozone fell to 2.8 percent in January, and to 2.9 percent in Germany. In view of such figures, expectations of interest rate cuts became more firmly established and yields went into reverse gear: On Friday morning, ten-year German government bonds are yielding 2.17 percent after 2.24 percent a week ago. US government bonds of the same maturity are offering 3.85 percent.
"Overall, it was a relatively quiet week," says Arthur Brunner, describing the situation in bond trading. Tim Oechsner reports a lot of turnover in US Treasuries, such as those maturing in 2024 (US91282CDN83), 2025 (US91282CHN48) and 2027 (US91282CFM82). The yields are currently 4.46%, 4.68% and 3.87%. Also in demand are bonds maturing next year from the European Stability Mechanism ESM (EU000A1U9894), as well as Italian long-dated bonds maturing in 2051 (IT0005425233).
Brunner
Grenke, Eon and John Deere popular
Gregor Daniel, who trades bonds for Walter Ludwig Wertpapierhandelsbank, continues to see buying interest in the bond of leasing specialist Grenke (XS2078696866), which matures at the beginning of 2025. "This time there is also news: Grenke wants to withdraw from the factoring business segment." He reports both purchases and sales for Otto (XS1979274708, XS1853998182) and VW (XS1893631769) shares.
Oechsner registered good demand for bonds issued by the Swedish company Intrum (XS2566291865), which specializes in management and collection services, and Eon (XS2673536541). US dollar bonds from John Deere (US24422EWZ86, US24422EWH88, US24422EXE49) were also well received. They offer around 4.5 percent for maturities until 2030, 2032 and 2033. At ICF Bank, there is a lot of activity in Multitude (NO0011037327) securities with mostly purchases and Deutsche Rohstoff (DE000A3510K1) with mostly sales.
Atos and Obotritia down
Shares in the French IT service provider Atos have recorded significant price losses in recent weeks, as Rainer Petz from Oddo BHF reports. For example, the bond maturing in 2028 (FR0013378460) is now only trading at 25 percent after around 60 percent at the end of December. Atos has been in financial difficulties for some time, and its share price has also collapsed. "There are fears of a haircut," explains Petz. However, small investors are unlikely to be affected due to the minimum investment amount of 100,000 euros.
Petz
According to Daniel, the hybrid bond from Obotritia Capital (DE000A1616U7) came under pressure again - the company had already postponed interest payments several times before. "Obotritia is once again failing to meet its obligations - Creditshelf on the brink of collapse?" asks Nebenwerte Magazin. The management board of credit broker Creditshelf announced yesterday, Thursday, that "following fruitless negotiations with the main shareholder Obotritia", it had come to the conclusion that the latter would not meet its contractual obligations to Creditshelf.
Brunner has also observed a number of sales in the SME segment. "Sales of the German SME bond fund (LU0974225590) could be behind this." In any case, the prices of Paragon bonds (DE000A2GSB86) have fallen. The German SME bond fund, which had invested in high-interest SME bonds, was liquidated last June and the securities are now being sold.
Things have become somewhat quieter in terms of new issues. Brunner only reports new bonds from ZF Europe with a yield of 4.75 percent until 2029 (<XS2757520965Y).
By Anna-Maria Borse, 2 February 2024 © Deutsche Börse AG
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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