The US inflation figures expected next week could put the recent improvement in sentiment on the bond market to the test, according to reports. Some new securities are scoring points in corporate bond trading.
10 May 2024. FRANKFURT (Börse Frankfurt). While the DAX continues to climb to new highs, the bond market is extremely quiet this week. "There's not much going on," reports Arthur Brunner from ICF Bank. After reaching annual highs at the end of April, yields in Europe and the USA have recently fallen again. The reason: the latest US labor market figures, which indicate a weaker economy - which would argue for interest rate cuts in the near future.
The yield on ten-year German government bonds had climbed to over 2.64 percent in April, but on Friday morning it was back down to 2.47 percent. "Yields have fallen slightly in generally slow trading this week," reports Tim Oechsner from Steubing AG, also with a view to yesterday's public holiday.
It still looks as if the ECB will cut interest rates on June 6, while the US Federal Reserve will not do so until September 18. "The US Federal Reserve is in no great hurry to cut interest rates for the first time," explains analyst Ralf Umlauf from Helaba. "According to Chairman Powell and other central bank representatives, further inflation data must first be awaited to see whether the disinflationary trend continues."
"Strong plus" expected for US inflation
There could be new indications of this in the coming week: The US inflation figures for April will be published. According to Hauke Siemßen from Commerzbank, they will signal continued high price pressure. "While core inflation will probably be somewhat lower than in previous months, we expect a strong increase in the overall inflation rate, which will put the recent improvement in sentiment on the bond market to the test." The bank therefore believes that the potential for a further decline in the ten-year US Treasury yield towards 4 percent and the ten-year Bund yield towards 2 percent is limited. "Rather, the stubborn inflation dynamics are likely to come back into focus, which suggests that yields will tend to rise."
Greece in demand
Greek bonds are also well received in government bond trading at the moment, as Oechsner notes, such as the bonds maturing in 2027 (GR0118020685) with a current yield of 2.37 percent. There is also demand for something unusual at Walter Ludwig Wertpapierhandelsbank: a zero-coupon bond from the European Bank for Reconstruction and Development EBRD in Turkish lira (XS2712548655) maturing in 2030. The yield is currently 47%, but the high currency risk must be taken into account.
Big names, small denominations
Most of Steubing AG's trading in corporate bonds revolves around bonds from well-known issuers with small denominations, as Ochsner reports. Examples include bonds from Mercedes-Benz (DE000A3LH6T7), SAP (DE000A13SL34) and the French RCI Banque (<FR001400P3D4) maturing in 2026 and 2027 with yields of between 2.47 and 3.76 percent. However, Deutsche Post bonds maturing in 2036 with a current yield of 3.55 percent (XS2784415718) and Boeing US dollar bonds maturing in 2031 with a yield of 5.89 percent (US097023AE52) are also in demand.
Newcomers Karlsberg, ABO Wind and SLR in demand
A number of fairly new securities are enjoying great popularity: the Karlsberg brewery bond (NO0013168005), for example, is in high demand, as Beate Mägerle from Walter Ludwig notes. The five-year bond with a coupon of 6 percent is currently trading at 103.45 percent. Also very popular: the new ABO Wind with 7.75 percent until 2029 (DE000A3829F5). "It is now trading at 103.5 percent," says Brunner. Also in demand: the bond issued in March by the SLR Group, a supplier to the construction machinery and commercial vehicle industry, with an 11.73% coupon until 2027 (NO0013177949).
According to Oechsner, a bond issued by Huber Automotive (<DE000A2TR430>) will be extended at a higher interest rate. "The resolution at the second creditors' meeting includes in particular the change of the maturity date to April 16, 2027 and an increase in the interest rate to 7.50 percent from April 16, 2024," the trader explains.
By Anna-Maria Borse, 10 May, 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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