Bonds: “Something is brewing in the USA”
US government bonds have long been considered a “safe haven”, but there are increasing doubts about this. The reason: the erratic US policy and the ever-increasing US debt. In the corporate sector, BMW and MTU are in demand - as is the new Werder Bremen bond.
23 May 2025 FRANKFURT (Börse Frankfurt). Moody's downgrade of the USA, further spending plans by the US government - the reputation of US government bonds as a “safe haven” is beginning to falter. “The news from the US and the rise in US yields have unsettled the market as a whole,” reports Marcus Mielert, who trades bonds for Oddo BHF. “Something is brewing on the government bond market,” reports ICF trader Arthur Brunner.
“Demand for the issue of US government bonds with a term of 20 years and a 5 percent coupon was so low that the syndicate banks had to take on much more than usual,” explains Brunner. The auction of new Japanese government bonds was also sluggish. “That is having a negative impact.” The yield on ten-year German government bonds stood at 2.62% on Friday lunchtime, compared to 2.58% a week ago. Yields on ten-year US Treasuries had climbed above 4.60 percent this week. Thirty-year yields even reached 5.16% - the highest since fall 2023. The situation has eased slightly since yesterday.
US Treasuries: those who buy want higher interest rates
Last Friday, Moody's, the last of the three major rating agencies, withdrew its top rating from the USA. In addition, the US House of Representatives passed a major tax cut package yesterday (Thursday). If the Senate approves it, the US deficit would increase even more in the coming years. “Doubts are growing as to whether the US can get its high national deficit under control,” comments analyst Rolf Schäffer from LBBW. “The message from many observers is that if America does not get its finances in order, yields on US government bonds will continue to rise.”
Romania bonds sought after election
Romanian bonds were well received in trading with government and government-related securities at the beginning of the week, as Gregor Daniel from Walter Ludwig Wertpapierhandelsbank observed. “This may have had something to do with the presidential election at the weekend and the victory of the pro-European candidate,” says the trader. One example: the bond maturing in 2038, which is currently yielding 6.7 percent (XS1768074319).
Gregor Daniel
BMW and MTU impress
In the area of corporate bonds, the focus continues to be on well-known names from the DAX family. According to Daniel, the BMW bond maturing in 2031 with a current yield of 3.19 percent (XS3075490188) is on the shopping lists. Also in demand: MTU Aero Engines maturing in 2031 (XS2887896574) and currently yielding 3.35 percent.
The market for new issues continues to perform well. Automotive supplier and tech group Bosch has issued bonds in several tranches worth over four billion euros, as Mielert from Oddo BHF reports. Südzucker also came to the market with new bonds. In both cases, however, the minimum investment amount is 100,000 euros.
Homann Holzwerkstoffe's new bond has been trading since this week. The coupon was set at 7.5 percent with a term until 2032 (NO0013536169). Daniel reports purchases. The price is at 100.45 percent on Friday afternoon.
Werder popular, Hertha not
SV Werder Bremen's new bond maturing in 2030 with a coupon of 5.75% (DE000A4DFGZ7) was also successfully placed. The volume was even increased from EUR 20 million to EUR 25 million due to high demand. Even so, not all subscriptions received could be fully taken into account. “The bond is in high demand and is now trading at 101.49 percent,” reports Brunner.
The situation is completely different in the case of second division club Hertha BSC (SE0011337054), as Brunner notes. “The Hertha bond is only trading at 92 percent,” he reports. The bond with a coupon of 10.5 percent matures in November this year and is to be refinanced. In addition to extending the bond by three years, Hertha also wants to reduce the coupon to 6.5 percent. A first attempt failed; according to the soccer club, not enough creditors took part in the process.
Arthur Brunner
By Anna-Maria Borse, 23 May 2025, © Deutsche Börse
About the Author
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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