While new projections by the US Federal Reserve now suggest three interest rate cuts for 2024, the ECB has "not talked about interest rate cuts at all". In corporate bond trading, familiar names such as Deutsche Telekom, Porsche and Fresenius continue to attract investors.
15 December 2023. FRANKFURT (Börse Frankfurt). The "week of the central banks" has brought some expected, but also some unexpected things. Tim Oechsner from Steubing AG speaks of a "search for direction after the Fed and ECB central bank meetings". The bottom line, however, was clear: the time of interest rate hikes is over. Accordingly, yields fell once again.
As predicted, the ECB left the key interest rate at 4.5 percent and the deposit rate at 4 percent yesterday, Thursday. There were no statements about future interest rate cuts. "We have not talked about interest rate cuts at all," explained ECB chief Christine Largarde. At the same time, the ECB now expects lower inflation rates in the eurozone, specifically 5.4 percent this year (previously 5.6 percent) and 2.7 percent in 2024 (3.2 percent).
Slight corrective movement after ECB meeting
The Swiss National Bank and the Bank of England also left interest rates unchanged this week, as did the US Federal Reserve on Wednesday. However, according to updated projections, the US Federal Reserve now expects three interest rate cuts next year instead of two. "Expectations of interest rate cuts rose massively following the Fed meeting, but corrected somewhat in the wake of the European central bank decisions," reports Ralf Umlauf from Helaba.
In a weekly comparison, the yield on ten-year Bunds has fallen: On Friday morning, it is only at 2.12 after 2.19 percent a week ago. Yesterday, Thursday, it was only around 2 percent - the lowest level since March. In the USA, the fall was even sharper: Ten-year US government bonds are now yielding just 3.91 percent, down from 4.21 percent last Friday.
Risk premiums for Europe's periphery fall
The ECB's decision to reduce the PEPP bond portfolio was received positively on the bond market. "Obviously there had been fears of a greater reduction, as peripheral spreads have fallen," notes Umlauf.
Gregor Daniel from Walter Ludwig Wertpapierhandelsbank reports purchases of a Poland bond maturing in 2030 (XS2726911931) and sales of a Spain bond maturing in 2029 (ES0000012F43). Oechsner sees good turnover in ESM (European Stability Mechanism) bonds maturing in 2026 (EU000A1U9944).
In demand: good credit rating, intact business models
Gregor Daniel and Rainer Petz from Oddo BHF report no anomalies in corporate bond trading. According to Oechsner, bonds from well-known names with maturities of two to five years are still being bought: "The credit rating must be good, the business models must be intact." As examples, he cites securities from SAP, Siemens, Lanxess, Eon, Deutsche Telekom, VW, BMW, Mercedes, Fraport, RWE, Conti and Porsche (XS2615940215) with yields of 3 to 4.5 percent. Bonds issued by Deutsche Bank (DE000DB7XJJ2), Fresenius (XS2698713695) and Deutsche Bahn (XS2624017070) were also in high demand. Also in demand: US dollar bonds from John Deere (US24422EWZ86).
The Metalcorp bond, which was suspended from trading for several weeks and was due to mature at the end of the year, is now tradable again, with a new securities identification number and ISIN (<DE000A3LQF45>), as Daniel reports. A quarter of the coupon of 9 percent, which the struggling company was unable to pay, will now be added to the nominal amount. This is now 1,022.50 euros instead of 1,000 euros. The bond of the service provider in the metals and minerals industry (DE000A3KRAP3), which matures in 2026, is currently trading at 1.1 percent.
By Anna-Maria Borse, 15 December 2023 © 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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