Bonds: Trump versus Powell - the teasing continues
The uproar over Trump's attacks on US Federal Reserve Chairman Powell has subsided somewhat, but concerns persist. No change in interest rates is expected at the ECB meeting next Thursday. And big names continue to move in the corporate sector.
18 July 2025. FRANKFURT (Börse Frankfurt). The fact that US President Trump has once again called for the dismissal of US Federal Reserve Chairman Powell caused nervousness on the bond markets this week. "Trump is calling for ever lower interest rates. The negative effects of US economic policy are not being taken into account," notes bond trader Tim Oechsner from Steubing AG. US tariff policy is leading to higher inflation. “The Fed should actually raise interest rates.”
Trump did back down somewhat after talks with Republican US senators. “Nevertheless, concerns about the US administration influencing the Fed's decision cannot be completely dispelled,” notes Helaba analyst Ulrich Wortberg.
Long-term yields rose this week: Ten-year Bunds briefly yielded over 2.73 percent. On Friday morning, it is still 2.70 percent, compared to 2.65 percent a week ago. As short-term interest rates are falling, the yield curve is steepening. "On the one hand, short-term yields are falling in line with falling central bank interest rates. At the same time, investors are shying away from bonds with long maturities due to the long-term inflation risks and government debt dynamics," notes analyst Hauke Siemßen from Commerzbank.
“Wait-and-see attitude of the ECB”
Next Thursday's last ECB meeting before the summer break is unlikely to bring any news - no interest rate adjustment is expected. “The latest statements from the Council representatives signal a wait-and-see attitude on the part of the central bank,” explains analyst Christian Reicherter from DZ Bank. In view of the uncertainty surrounding the US tariffs and their impact on growth and inflation, the ECB considers itself well positioned with the current key interest rate level. After the summer break, the bank expects a final easing step of 25 basis points.
Search for extra yield with Bulgarian and Romanian government bonds
European Union bonds maturing in 2031 with a current yield of 2.65% (EU000A3L1DJ0) are in demand in government and government-related bond trading this week, as trader Gregor Daniel from Walter Ludwig Wertpapierhandelsbank reports. Also popular: Austrian bonds maturing in 2034 and currently yielding 2.9 percent (AT0000A10683).
New government bonds from Bulgaria were also well received: The tranche maturing in 2035 offers a coupon of 3.375 percent (XS3124345631), the one maturing in 2045 4.125 percent (XS3124393367). Steubing trader Oechsner reported good turnover in new US dollar bonds from Romania maturing in 2030 with a 5.75 per cent coupon (XS3114901336) and new KfW euro bonds maturing in 2028 with a 2.125 per cent coupon (DE000A4R2L42).
Mercedes, Fresenius and Eon in demand
There is not much going on in the corporate bond business. “It's extremely quiet,” reports Marcus Mielert, who trades bonds for Oddo BHF. “There is a lack of momentum,” notes Daniel. There were sales in the bond issued by Viennese real estate developer UBM Development (AT0000A2QS11), as Daniel reports. “But buyers are quickly found again.”
According to Oechsner, well-known names continue to move. Examples: Mercedes-Benz bonds maturing in 2030 with a current yield of 2.58 percent (DE000A289QR9) and Fresenius SE with a yield of 2.99 percent (XS2698713695). According to Daniel, Eon bonds maturing in 2028 and currently yielding 2.24 percent are popular (XS2574873266).
According to Ochsner, some money is also being invested in US dollar bonds, such as those from pharmaceutical company Johnson & Johnson maturing in 2030 and currently yielding 4.19 percent (US478160DJ00) and car manufacturer Ford maturing in 2045 and yielding 7.16 percent (US345370CS72).
Tim Oechsner
By Anna-Maria Borse, 18 July 2025, © Deutsche Börse AG
About the Author
Anna-Maria Borse is a financial and business editor specializing in financial markets/stock exchanges and economic issues.
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