Bonds: "Mixture of interest rate and economic fears"

Yield curve: clear signs of recession

Ten-year German government bonds are currently yielding 2.49 percent, about the same as a week ago. However, the interest rate gap between two-year and ten-year bonds has widened again: The yield on ten-year Bunds was 74 basis points lower than two-year paper on Thursday, a record high, according to Commerzbank.

"Strongly inverted yield curves are often interpreted as a sign of an impending recession and usually only return to normal when central banks have finished raising interest rates," explains analyst Hauke Siemßen. However, that point has probably not yet been reached, he adds. "Both ECB and Fed representatives expressed rather hawkish views this week." At next week's central bank meeting in Sintra, no other tone is likely to be struck for the time being. "The focus remains on fighting inflation."

Sixt and Grenke in good demand

In corporate bond trading, the new bonds of car rental company Sixt (DE000A351WB9) and leasing specialist Grenke (XS2630524986>) are in demand at Walter Ludwig Wertpapierhandelsbank, according to Beate Mägerle. The yields are currently at 4.4 percent and 6.8 percent. Also sought after: longer-dated bonds from ThyssenKrupp (<DE000A2TEDB8>) and Mercedes (DE000A3LH6U5). There was greater turnover in hybrid bonds from Otto (<XS1853998182>) and Baywa (DE000A351PD9). "Here, purchases and sales were in balance," notes the trader.

A lot of Steubing AG's turnover is in bonds from Deutsche Bank (<DE000DB7XJJ2>), Hochtief (DE000A2YN2U2), Deutsche Telekom (XS1617898363), VW (XS2374595044) and LVMH (<FR0013257623>), all maturing between 2024 and 2027 and with yields between 3.3 and 4.2 percent. The bond of photovoltaic company 7C Solarparken, which also has a high turnover, offers more, with a maturity until 2028, a coupon of 2.5 percent and a current yield of just over 5 percent (DE000A351NK9).

Difficult times for SME bonds

There has been quite a bit of news recently from the Mittelstandsanleihen segment: While bonds such as those of Karlsberg Brauerei (<DE000A254UR5>), Katjes International (<DE000A2TST99>), Mutares (NO0012530965) or PNE (DE000A30VJW3) are holding up well and trading around 100 percent, the situation is different for others. The bond of ERWE Immobilien (DE000A255D05), which already came under pressure last week, continues to be badly hit. "Much about does not go, however, who wanted out, is out," notes Petz. The price of the bond, which matures at the end of the year and has a volume of 40 million euros, continues to trade around only 15 percent. Two weeks ago, it was still around 50 percent.

It is also not good news for the segment that the Deutsche Mittelstandsanleihe Fonds DMAF (LU0974225590) will be liquidated, as announced by the capital management company IP Concept on June 14. The fund had already been suspended from trading since the beginning of the year because of the problems surrounding the ailing Verius Immobilienfonds. Nevertheless, the news of the closure came as a surprise, even for the fund management and KFM Deutsche Mittelstand AG, which launched the fund. IP Concept, a subsidiary of DZ Privatbank, referred only to the protection of investor interests. According to the online portal for corporate bonds BondGuide, the fund volume had collapsed from a peak of 260 million euros to half that amount in the meantime. The fund also holds larger positions in the Monaco Group around Metalcorp, R-Logitech and Agri Ressources. All of the fund's bonds are now to be sold off step by step. "Uncontrolled sales into the market will lead to further inevitable price losses for affected bonds," comments BondGuide.

"We are noticing this clearly and are seeing sell-offs in all Mittelstand bonds," reports Oechsner of Steubing AG. However, Metalcorp (<DE000A3KRAP3>) and MRG Finance (XS1897122278) are also directly affected, he said.

News from DEAG, Hörmann and AustriaEnergy

Three securities are currently being subscribed for: firstly, a three-year bond issued by concert promoter DEAG Deutsche Entertainment (NO0012487596), with a coupon of between 7.5 and 8.5 percent. The subscription period runs until June 27.

There is also news from Hörmann Industries (NO0012938325): The bond runs until July 2028 and offers between 6.5 and 7.5 percent, with subscription period until June 30. The existing bond 2019/24 (<NO0010851728>) can be exchanged. In all cases, the bonds are so-called Nordic Bonds, which are issued without a securities prospectus. For this purpose, the company Nordic Trustee takes over the monitoring of the issuers' obligations and also becomes the contact point in case of performance problems.

Thirdly, AustriaEnergy (DE000A3LE0J4) is coming onto the market with a bond that can be subscribed to until June 26. It offers 8 percent and matures in June 2028.

by Anna-Maria Borse, 23 June 2023 © Deutsche Börse AG