The significant decline in yields has not continued. There has been a countermovement, albeit a small one. One reason: somewhat muted expectations of interest rate cuts.
24 November 2023. FRANKFURT (Börse Frankfurt). The Thanksgiving holiday in the USA and today's Black Friday with shortened trading hours are also having an impact here in Germany. "Without the US markets to provide impetus, the bond market remains fairly quiet," reports Tim Oechsner, who trades bonds for Steubing AG. Liquidity has also fallen due to the approaching end of the year. "The books of many banks are slowly closing." However, the general mood remains positive.
Ten-year German government bonds are yielding 2.66 percent again on Friday morning after 2.57 percent a week ago. The yield on US government bonds with the same maturity is at 4.49 percent after 4.45 percent last Friday. "After the significant price gains on the global bond markets since the beginning of the month, the decline in yields is slowly running out of steam," says bond market analyst Hauke Siemßen from Commerzbank. Helaba refers to the ECB meeting minutes, according to which they do not want to close the door to a possible interest rate hike, and comments by Bundesbank President Nagel that the "job" is not done. "This has somewhat dampened expectations of interest rate cuts and weighed on the bond market."
Lower premiums for Italy
The suspension of the debt brake in Germany is also leading to falling spreads, i.e. risk premiums that euro countries with lower credit ratings have to pay over German government bonds. In addition, the review of Italy's rating by the rating agency Moody's provided a small surprise: "The negative outlook for the current Baa3 rating was unexpectedly upgraded to a stable outlook," reports Siemßen. The yield premium of ten-year Italian BTPs over German government bonds fell to 170 basis points in the short term.
From next year, Germany will no longer issue any new inflation-linked bonds ("linkers") or increase existing ones, as the Federal Finance Agency explained on Wednesday this week. "From a long-term perspective, the economic advantages of inflation-linked German government securities are counteracted by the associated risks," said Managing Director Tammo Diemer, explaining the withdrawal to Börsen-Zeitung. This applies to planning security as well as to the risk of high financing costs for the federal government in individual years. Germany issued such bonds for the first time in March 2006. The outstanding bonds will continue to be tradable.
Popular: RWE, Mercedes, VW and Fraport
Well-known names and manageable maturities continue to score points in corporate bond trading. Gregor Daniel from Walter Ludwig Wertpapierhandelsbank sees purchases for bonds from RWE with a coupon of 3.625 percent and maturity in 2029 (XS2584685031) and Mercedes-Benz with 3.7 percent until 2031 (DE000A3LH6U5). Oechsner reports good turnover for bonds from Mercedes-Benz (<DE000A3LH6T7A>), VW Leasing (XS2694874533), VW (XS2374595044), Wienerberger (AT0000A37249), Fraport (XS2198879145) and Continental (XS2630117328) with maturities between 2026 and 2031 and current yields of 3.6 to 4.6 percent.
Real estate bonds: "Caution due to bad news"
The situation in the real estate sector remains tense. According to Daniel, the FCR Immobilien bond maturing in 2024 with a 5.25 percent coupon (<DE000A2TSB16>) has come under selling pressure. The subscription period for a new bond from the real estate company (DE000A352AX7) ended on Tuesday. The old bond could be exchanged for the new one, which runs until 2028, offers 7.25 percent and will be traded from November 27. "There is caution because of all the bad news from the real estate market, so the old bond is now yielding over 30 percent at the current price," notes Daniel. The share (DE000A1YC913) has already lost a lot of ground, with the price almost halving since November 2022.
Daniel
EnBW launches new issue
New news came from EnBW, for example: the energy company is paying 4.3 percent for a term until May 2034 (XS2722717555), the denomination is small investor-friendly at 1,000 euros. According to Daniel, however, the issue is hardly attracting any attention; he reports only "marginal purchases".
The subscription period for the BDT Media Automation bond (DE000A351YN0), a green bond maturing in 2028 with an 11.5 percent coupon, runs until November 28. According to its own statements, BDT is a leading global developer and manufacturer of data storage systems and a provider of system solutions for printing and automation technology. Read more here.
by Anna-Maria Borse, 24 November 2023 © Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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