Bonds: Yields rise after Powell's comments

The ECB's decision to hold steady and the US Federal Reserve's interest rate cut came as no surprise. However, subsequent comments by the Fed chairman caused alarm.

31 October 2025. FRANKFURT (Börse Frankfurt). Yields rose again this week. “This is probably due to the extremely positive risk sentiment on the financial market, which is reflected above all in soaring share prices,” comments Commerzbank analyst Hauke Siemßen. In such an environment, government bonds are less in demand – especially German government bonds, which are considered safe.

Comments by US Federal Reserve Chairman Jerome Powell also played a role. On Wednesday this week, the Fed cut key interest rates by 25 basis points for the second time in a row. However, according to Fed Chairman Powell, a further cut in December is “not a foregone conclusion.” “Overall, market participants were not enthusiastic, but rather frightened,” explains Helaba analyst Ralf Umlauf.

Federal bond yields approach September highs

According to Bloomberg, US government bonds fell more sharply than they have in almost five months following Powell's comments. The yield on ten-year US Treasuries rose above the 4 percent mark again. Ten-year German government bonds yielded 2.65 percent on Friday afternoon, up from 2.54 percent at the beginning of last week. This brings yields back to the levels reached in mid-September of over 2.70 percent.

Yesterday's ECB interest rate decision, on the other hand, had little impact on the markets. “The central bank is leaving the deposit rate unchanged for the third time in a row. Economists had expected this,” reports Tim Oechsner, who trades bonds for Steubing AG. No action is expected at the December meeting either. “The comments made by the members suggest satisfaction with the current interest rate situation,” he notes. 

“Demand for exotic products on the rise”

Oechsner sees good sales in trading in government and government-related bonds for two bonds issued by the European Stability Mechanism (ESM). One is due at the end of next year and currently yields 1.48 percent (EU000A1Z99N4), the other is due next March and yields 1.32 percent (EU000A1U9944).

But exotic bonds are also in demand. “It is striking that demand for bonds in currencies such as the Australian dollar, Brazilian real, British pound, and Polish zloty has risen,” explains bond trader Gregor Daniel of Walter Ludwig Wertpapierhandelsgesellschaft. One example is the bond issued by the International Finance Corporation, a development bank belonging to the World Bank, in Brazilian real. It currently offers a yield of 11.94 percent (XS3124532311) at maturity in 2030. 

Small recovery for automotive suppliers, VW sales

Securities from the automotive industry are proving volatile. “There was a small recovery this week,” reports Rainer Petz from Oddo BHF, referring to two automotive suppliers: ZF (XS2399851901) and Adler Pelzer (XS2623604233) . Both bonds had previously lost significant ground. However, according to Gregor Daniel, the Volkswagen bond maturing in October 2026 with a current yield of 2.26 percent (XS1893631769) is being “constantly sold.” “VW's quarterly figures and the group's billion-euro loss are having an impact,” he explains.

Bonds issued by Würth (XS2480515662), a manufacturer of assembly and fastening materials, are also being sold off. On the other hand, bonds issued by RCI Banque with a maturity date in 2029 and a current yield of 3 percent (FR001400N3F1) are “always in demand.”

Great interest in Deutsche Rohstoff

The bond issued by Deutsche Rohstoff AG, which is still in the subscription phase, has been very well received. The subscription period was originally scheduled to end on November 10, but due to high demand, it is now likely to be terminated early. “The books are well filled, and the planned €50 million has already been exceeded,” reports Oechsner. The bond matures in 2030 and offers 6 percent (DE000A460CG9). The company had already issued a bond in 2023, which is currently trading at 106.5 percent (DE000A3510K1).

By Anna-Maria Borse, 31 October 2025 © Deutsche Börse AG