Will there be more interest rate hikes or not? The answer is more unclear than ever before. Increasingly, the consequences of the rise in interest rates are making themselves felt - in the economy in general, and also in the real estate market.
1 September 2023. FRANKFURT (Börse Frankfurt). The stock market is currently lacking a compass, including in bond trading. "Financial market participants are uncertain about the further interest rate path of the central banks," notes analyst Ralf Umlauf of Helaba. For this month's upcoming meetings of the ECB and the Fed, he says, there are good arguments for holding still, but probably just as many for a further increase. Tim Oechsner of Steubing AG speaks of a "reorientation" in the market. "The way forward is open, both at the Fed and the ECB."
No clear signals came from the August inflation figures for the euro area published yesterday (Thursday). Contrary to expectations, the inflation rate did not decline, but the core rate did. ECB Executive Board member Isabel Schnabel also attracted attention yesterday. She explained that the economic outlook had deteriorated since June.
"Yields near the highs"
The negative effects of the ECB's interest rate hikes on the economy are becoming increasingly clear," notes bond market analyst Hauke Siemßen of Commerzbank. An interest rate pause by the ECB in September is thus becoming increasingly likely. "The futures market has still priced in a probability of about 30 percent for an interest rate move of 25 basis points." The bank believes yields in international bond markets are likely to be near highs. "As economic headwinds increase, we see potential for yields to fall. This also applies in the euro area," says the bank's chief investment officer, Thorsten Weinelt.
Information on the further action of the U.S. Federal Reserve are hoped from the U.S. labor market data due this afternoon at 14:30 our time. Yields moved slightly lower on a weekly basis: Ten-year Treasuries are yielding 2.47 percent Friday morning, down from 2.52 percent last Friday and a recent high of 2.70 percent. Ten-year U.S. Treasuries are yielding 4.11 percent, down from a high of 4.36 percent in August.
Problem children Immo bonds
In corporate bond trading, short and medium maturities and good credit ratings remain popular. Tim Oechsner reports brisk turnover in bonds issued by Deutsche Bank (DE000DB7XJJ2), Eon (XS2673536541), Mercedes (DE000A2DADM7, DE000A3LH6T7) and Hochtief (DE000A2YN2U2). These mature between 2025 and 2029, with current yields ranging from 3.31 to 3.85 percent.
The real estate sector continues to be a headache, even though some real estate stocks have come off the lows. "The differences are large, Vonovia shares have recently recovered significantly," explains Rainer Petz of Oddo BHF.
This week, bonds issued by Accentro Real Estate (DE000A254YS5) recorded price losses. The Berlin-based residential real estate developer had reported a significant drop in sales for the first half of the year, and the forecast for the full year was suspended. The share price fell from 55 to 45 percent. Meanwhile, the lower prices of the bonds of Vienna-based real estate developer UBM Development, which came under pressure in the previous week, are being used for an entry. "We see only purchases," reports Gregor Daniel of Walter Ludwig Wertpapierhandelsbank. However, only the bond (AT0000A2AX04), which runs until 2025, is affected, he said. "With the last turnover at 87 percent, the yield is 9.59 percent." No turnover was recorded in the other UBM securities (AT0000A2QS11, AT0000A35FE2, AT0000A23ST9). UBM had reported a large loss for the first half of the year.
Photon Energy loses ground
The Dutch solar group Photon Energy (DE000A3KWKY4) saw a significant decline. The bond, which matures in 2027 and has a coupon of 6.5 percent, was still trading at 93 percent in mid-July; now it is down 50 percent. "The share has also lost a lot," adds Oechsner. The main trigger: weak business performance. "Photon was in the red in the first half of the year and has lowered its forecast for the current fiscal year."
News from Continental
As the vacation season winds down, new issue business is also picking up. "We are seeing more new bonds again," Petz reports. Daniel reports "smaller purchases" for a new Continental bond maturing in March 2027 with a 4 percent coupon (XS2672452237). The denomination is 1,000 euros..
by: Anna-Maria Borse, 1 September 2023 © Deutsche Börse AG
Oechsner
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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