Bonds: "Markets are nervous"

Before the central bankers' speeches in Jackson Hole, which are expected to start this afternoon, a wait-and-see approach is the order of the day. But the anxiety remains, the further development of key interest rates is too uncertain. Still sought after: Corporate bonds from "good names".

25 August 2023. FRANKFURT (Börse Frankfurt). These days, all eyes are on Jackson Hole, Wyoming, the "epicenter of the financial industry," as bond trader Tim Oechsner of Steubing AG puts it. The annual meeting of international central bankers began there yesterday, Thursday. Today at 4 p.m. our time, U.S. Federal Reserve Chairman Jerome Powell will speak, at 9 p.m. ECB chief Christine Lagarde. Both speeches are eagerly awaited. "Market participants are hoping for signals about whether the dampening of macroeconomic activity is already assessed as sufficient and the interest rate cycles have ended," notes Ralf Umlauf of Helaba. 

Bundesbank head Joachim Nagel already expressed his views yesterday on the sidelines of the conference: "For me, it is far too early to think about a pause in interest rate hikes," Nagel said in an interview with Bloomberg TV. "We should not forget that inflation is still around 5 percent. That's way too high."

According to Christoph Rieger of Commerzbank, significant stimulus is more likely to come from the ECB. He points to the deteriorating economic outlook in the euro area, which contrasts with the ECB's expected acceleration of growth in the second half of the year. "Therefore, Lagarde could provide clearer stimulus than Powell, who is likely to stick to the 'soft landing' scenario for the U.S. economy," the analyst says.

"Risk appetite not very high"

For the U.S., markets are now pricing in another rate hike by November again with around 55 percent probability, Deutsche Bank notes. A first full rate cut is still expected in May 2024, it said. "Also with around 55 percent probability, the interest rate futures markets see another ECB rate hike by the end of the year."