The slightest hint of lower interest rates is greeted with great enthusiasm - perhaps too much? In any case, long-term investors are now in demand: some people want to lock in the high interest rates for themselves.
26 January 2024. FRANKFURT (Börse Frankfurt). Bond trading was also dominated by the ECB meeting yesterday (Thursday). "Before that, it was a case of wait and see," reports Arthur Brunner from ICF Bank. After all, people were hoping for answers to the question: when and at what speed will the central banks cut key interest rates? "Expectations of interest rate cuts are pronounced on both sides of the Atlantic," notes Tim Oechsner from Steubing AG. He therefore sees a latent risk of disappointment.
As expected, the ECB left key interest rates unchanged. ECB chief Christine Lagarde also reiterated her statement from the Davos World Economic Forum that key interest rates could fall from the summer. But that was not all: "Lagarde noted for the first time that wage growth has recently stabilized," said bond analyst Marco Wagner from Commerzbank. The markets interpreted this as a "triple step towards lowering interest rates".
Yields on German government bonds, which had risen in advance, fell as a result. On Friday morning, ten-year German government bonds were yielding 2.24 percent after a high of 2.35 percent this week and 2.30 percent last Friday. "The euphoria was great, but perhaps a little exaggerated," comments Brunner.
USA: Inflation must fall to 2 percent in the long term, according to the Fed
The next interest rate decision is due in the USA next week. According to analyst Bernd Weidenstein from Commerzbank, the Fed will see no reason to change its key interest rates. "The Fed will try not to fuel hopes of rapid interest rate cuts." First they want to be sure that inflation will actually fall to the 2 percent target on a sustained basis.
Grenke, Siemens, VW & Co in demand
Most corporate bond trading continues to revolve around well-known names. Gregor Daniel, who trades bonds for Walter Ludwig Wertpapierhandelsbank, continues to see a lot of buying interest in the Grenke bond maturing at the beginning of 2025, which is currently yielding 4.46% (XS2078696866). According to Oechsner, Siemens bonds maturing in 2028 (DE000A1UDWN5), Volkswagen Leasing maturing in 2031 (XS2694874533), Bayer maturing in 2033 (XS2630111719) and Fresenius maturing in 2030 (XS2698713695) are in high demand. The securities issued in the middle of the month by Eon with 3.375% until 2031 (XS2747600018) and Schaeffler with 4.75% until 2029 (DE000A3823S1) were also well received.
Daniel
Fixing interest rates for the long term
"Longer terms of ten years and more are also popular," explains Oechsner, even the new subordinated bond from energy company EnBW with 5.25 percent and a term of 60 years (XS2751678272). However, the minimum investment amount is 100,000 euros. According to Daniel, something "exotic" is also in demand: an EBRD zero-coupon bond in Turkish lira maturing in 2030, which is currently trading at 7.26% (XS2712548655). "Some are probably tempted by the yield." This is currently over 47 percent.
Brunner also reports very good turnover for the recently increased bond of Munich-based investment company Mutares (NO0012530965), which is now trading at 104.7 percent. The trader also sees buys for shares in LR Global Holding (<NO0010894850>), a direct sales company for health and beauty products. According to Daniel, the new bond from car rental company Sixt has so far only met with limited buying interest. "The coupon is probably too low for many." The bond offers 3.75 percent per year and matures in 2029 (DE000A3827R4).
Brunner also sees higher prices with low turnover for the SV Werder Bremen bond (DE000A3H3KP5) following the entry of new investors. "SoWiTec (DE000A2NBZ21) has also performed well following restructuring and suspension from trading." The bond is now trading at 84% again after previously trading at around 55%.
Brunner
Schlote share price collapses
But there is also bad news from the SME segment: automotive supplier Schlote wants to restructure the bond maturing in November this year with a coupon of 6.75 percent (DE000A2YN256). "The nominal value is to be halved, the interest payment suspended until the repayment date and the term extended by nine years," says Brunner. As a result, the share price fell from around 55% to just 6.58%. Schlote has called for a vote without a meeting between February 9 and 11. In the opinion of Schutzgemeinschaft der Kapitalanleger SdK, the restructuring concept cannot be approved and advises those affected to organize themselves.
By Anna-Maria Borse, 26 January 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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