The headlines this week are clearly dominated by equities and cryptos - i.e. risk assets. However, demand is also good on the bond market, as traders report. It is mostly about short and medium maturities.
1. March 2024. FRANKFURT (Börse Frankfurt). Record after record on the stock markets, leaving bonds in the shadows. "It's been a crazy week, with new all-time highs on the DAX and bitcoin soaring," says Arthur Brunner from ICF Bank. This "risk-on" mood has put pressure on the bond markets. However, turnover in bond trading was extremely good. "For example, many US Treasuries were bought before the latest US inflation figures were announced." Tim Oechsner from Steubing AG also reported brisk trading, for example in government bonds from the USA and the eurozone. Ten-year Bunds yielded a peak of 2.5 percent this week after 2.36 percent last Friday. This Friday morning it is 2.45 percent.
"ECB will take its time until June"
The latest inflation figures offered no major surprises, with price pressure continuing to ease. The PCE index, the US Federal Reserve's preferred price measure, rose by just 2.4% year-on-year in January. The inflation rate in Germany fell to 2.5% in February. Inflation in the eurozone also weakened further in February to 2.6%, as was announced today. However, only 2.5 percent had been expected.
According to the market, nothing will happen at the ECB meeting next Thursday. However, key interest rates will definitely fall over the course of the year. "However, the continuing strong wage increases suggest that the central bankers will take their time with a first interest rate cut until June," explains Commerzbank analyst Marco Wagner.
As far as government bonds are concerned, Oechsner sees good demand for an EU bond that matures in November 2025 and currently yields around 2.9 percent (EU000A284451). A new EU bond with 3 percent until 2034 (EU000A3K4ES4) is also in demand. Also in demand: Italian government bonds maturing in 2035 with a coupon of 4 percent (IT0005508590).
Sixt popular after figures, Eon, VW and Grenke in demand
In corporate bond trading, Gregor Daniel from Walter Ludwig Wertpapierhandelsbank is observing purchases of the Sixt bond with a 3.75 percent coupon maturing in 2029 (DE000A3827R4). The car rental company today reported record sales for 2023 - and the second-best result in the company's history.
Shares of Eon (XS2574873266), VW (XS2374595127) and Grenke (XS2078696866) with maturities until 2028, 2025 and 2025 and yields of 3.24, 3.65 and 4.1 percent were also well received. "Although the focus is still on short and medium maturities, some people are also buying long maturities," adds Daniel. One example is the EnBW bond maturing in 2034 with a current yield of 3.88% (XS2722717555).
Crisis at sensor and lighting group AMS-OSRAM
According to Brunner, positive analyst opinions led to inflows into bonds issued by the Dutch media and corporate group Azerion (NO0013017657). According to Oechsner, the Siemens bond maturing in 2028 (DE000A1UDWN5) is popular, with a current yield of 2.95%. The Steubing trader reports a minus for bonds from AMS-OSRAM (USA0400QAK34). The German-Austrian group reported the loss of an important major customer yesterday, which is said to be Apple.
According to Brunner, two bonds from the Finnish financial services provider Multitude (NO0011037327, NO0012702549) made significant gains in the SME bond segment. "The completed sales of the Deutsche Mittelstandsanleihenfonds (LU0974225590) could be behind this," Brunner suspects.
There has been no recovery on the market for real estate bonds. Aareal Bank, which is heavily involved in the USA, reported a slump in profits and significantly higher risk provisions this week. "The problem of US commercial real estate remains", notes Rainer Petz from Oddo BHF. The bond traded at Oddo, which matures in 2027 and has a coupon of 4.6 percent, is currently trading at 40 percent (DE000A2DASM5).
TUI sustainability bond with additional premium
According to Daniel, the bond from Westphalian health and beauty products provider LR Health & Beauty with a coupon of 11.437 percent and a term until 2028 (NO0013149658) is new to the market. "However, there is not much interest." The bond serves to refinance a bond of the subsidiary LR Global Holding due in 2025 ahead of schedule. Travel group TUI has also launched sustainability-related bonds with a volume of 500 million euros (XS2776523669) on the market, as Petz explains. Originally only 300 million euros were to be issued, but demand was extremely high. The initial interest rate is 5.875 percent and is also linked to sustainability targets. It increases if certain CO2 reduction targets are not met.
By Anna-Maria Borse © 1. March 2024, Deutsche Börse AG
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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