27/06/25 12:48:08

Bonds: Debt plans cause interest rates to rise

The federal government's planned new debt, amounting to billions, is causing interest rates on federal bonds to climb. In corporate bond trading, Fraport and Fresenius are performing well, as are high-yield bonds from Mutares and Homann.


27 June 2025. FRANKFURT (Börse Frankfurt). The Middle East conflict remains a major topic on the markets – but this week, there are signs of détente. “The financial markets have calmed down somewhat following the end of the military conflict between Iran and Israel and the US,” reports Helaba analyst Ulrich Wortberg. Nevertheless, the yield on German government bonds, which are considered safe, rose, as bond trader Arthur Brunner of ICF Bank notes. “The background to this is the federal government's financial planning announced this week. New debt of 850 billion euros is planned by 2029.” New issues would thus rise more sharply than previously expected.

The yield on ten-year German government bonds stood at 2.57 percent on Friday afternoon, up from 2.51 percent a week ago, while thirty-year bonds are once again yielding over 3 percent. “The yield premiums that peripheral countries such as Italy, Portugal, and Greece have to pay compared to German government bonds have fallen, however,” explains Brunner.

Yields falling now?

Commerzbank expects German government bond yields to break out of their trading range next week. “Lower core inflation in the eurozone, a cooling US labor market, and the statements made at the ECB's Sintra Forum are likely to reinforce expectations of interest rate cuts,” explains analyst Erik Liem. The inflation rate in June is likely to be just below the ECB's target of 2 percent again. He also expects the US labor market to weaken, which would make interest rate cuts more likely. He also expects further impetus for slightly lower yields from the central bank meeting in Sintra, Portugal, which begins on Monday.

In the US, concerns about political influence on central bank policy have already caused yields to fall. “US President Trump wants to announce a successor to Fed Chairman Powell, whom he has sharply criticized and whose term ends next year, as early as September or October,” reports Helaba analyst Wortberg.

Fraport and Fresenius sought after, as is Homann

Trading in corporate bonds is rather quiet. “The typical summer slump is making itself felt,” explains bond trader Gregor Daniel from Walter Ludwig Wertpapierhandelsbank. Fraport bonds maturing in 2032 (XS2832873355) and Fresenius bonds maturing in 2030 (XS2482872251) continue to be popular, offering yields of 3.45 percent and 2.68 percent at current prices. Also popular: a US dollar-denominated long-term bond from RWE with a 6.625 percent coupon and maturity in 2075 (XS1254119750).

Gregor

Gregor Daniel

In the high-yield bond sector, Daniel reports that the Homann Holzwerkstoffe bond issued at the beginning of the month with a 7.5 percent coupon and maturity in 2032 (NO0013536169) has been in high demand this week. “The price has risen to a high,” reports the trader. The yield is now 7.21 percent. According to Brunner, the two bonds issued by the investment company Mutares (NO0012530965, NO0013325407), which now offer 9.9 and 9.1 percent with maturities in 2027 and 2029, are also enjoying brisk demand. “The Mutares investment Magirus is performing well,” explains Brunner.

Arthur Brunner

Arthur Brunner 

Many new issues, Formycon successful

Declining uncertainty has revived the new issue market. “There were quite a few new issues, most of which were well received,” notes Marcus Mielert of Oddo BHF. “However, some issuers, such as Techem, have exaggerated interest rate expectations.” Brunner also sees brisk issuance activity: “However, these were mainly bonds with a minimum investment of €100,000.”

Due to high demand, the subscription period for the first bond issued by biotech company Formycon (NO0013586024) was closed early at 12 noon today. The bond in Nordic format with a planned volume of €50 million runs until 2029. The interest rate had been set in advance at Euribor plus 7 to 7.5 percent, and the final margin will be determined today on the basis of the subscription orders. Listing on the Quotation Board (Open Market) of the Frankfurt Stock Exchange is still scheduled for July 9. Formycon – long in the Scale segment and now in the Prime Standard – produces biosimilars, i.e., generic versions of biotechnologically manufactured drugs.

By Anna-Maria Borse, 27 June 2025, © Deutsche Börse

Anna-Maria Borse is a financial and business editor specializing in financial markets/stock exchanges and economic issues.

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