Mixed data has caused some movement this week. In a weekly comparison, however, yields are unchanged. In addition to the EU, Lufthansa, for example, also came to the market with new bonds.

17 May 2024. FRANKFURT (Börse Frankfurt). When will the first interest rate cuts come? This week, too, almost everything revolves around this question. "Initially, US producer prices surprised on the upside and dampened expectations of interest rate cuts in the short term," reports analyst Ralf Umlauf from Helaba. But then the rise in US consumer prices fell short of expectations, fuelling speculation that interest rates would be cut again. This Friday, comments by ECB Executive Board member Isabel Schnabel are attracting attention. Schnabel warned of two successive interest rate cuts in June and July. A first rate cut in June could, however, "be appropriate".

"There was a lot of movement in the market", reports Arthur Brunner from ICF Bank. On Friday morning, however, yields are more or less back to last Friday's level, at 2.48 per cent for ten-year Bunds. In view of the ECB's upcoming interest rate cut at the beginning of June, Commerzbank also believes it is unlikely that yields will rise soon. "In the coming weeks, ten-year Bund yields could test the 2.3 per cent mark," says Hauke Siemßen.

EU bonds increasingly important

A new EU bond with a coupon of 3.375 per cent to 2054 (EU000A3K4EY2) is popular in trading with government and government-related issuers, according to Tim Oechsner from Steubing AG. Also in demand: Bonds from Baden-Württemberg maturing in 2029 with a coupon of 2.75 per cent (DE000A14JZ38).

According to Commerzbank, the EU is also playing an increasingly important role as a securities issuer in the market for bonds from government-related issuers. "Recently, some well-known bond index providers even announced that they would examine whether EU bonds could also be included in the standard government bond indices," explains the bank. From the EU's point of view, this would probably go hand in hand with a larger pool of investors and ultimately lower financing costs. "However, we doubt that EU bonds will replace German government bonds as the most liquid and safest investment in the eurozone in the medium term."

Würth and Mercedes in demand, Hertha not

Trading in corporate bonds is mostly about well-known names. Beate Mägerle from Walter Ludwig Wertpapierhandelsbank reports good demand for bonds from Würth (XS2480515662) and Mercedes-Benz (DE000A3LH6U5). This week, the Hertha BSC bond (SE0011337054) has seen significant price losses, as Brunner explains. "There are apparently difficulties at the US financial investor 777 Partners."

Flood of new issues

There were several new issues this week. "Issuers are clearly not expecting interest rates to fall soon," notes Brunner. New to the market, for example, are Lufthansa bonds maturing in 2030 at 4 per cent (XS2815984732). With a denomination of 1,000 euros, the airline is also targeting private investors. "We are seeing a lot of turnover," reports Brunner. Ferrari also issued a new bond offering 3.625 per cent until 2030 (XS2824763044), albeit with a denomination of 100,000 euros. Also new on the market: a Munich Re bond with 4.25 per cent, maturing in 2044 and a special call right in 2031 (XS2817890077).

Tim Oechsner also reports on many new securities, specifically Hamburg Commercial Bank with a coupon of 4.95 per cent until 2029 (<DE000HCB0B36A), DZ Hyp with 3 per cent until 2032 (DE000A351XW3), BMW with 3.5 per cent until 2032 (XS2823825802), Novo Nordisk with 3.375 and 3.125 per cent until 2026 and 2029 (XS2820449945, XS2820454606), Volvo with 4.75 per cent until 2030 (XS2811097075) and WarnerMedia Holdings with 4.302 per cent until 2030 (XS2821805533) - all in euros.

By Anna-Maria Borse, 17 May 2024 © Deutsche Börse AG

About the author

Anna-Maria Borse is a financial and business editor specialising in the financial market/stock exchange and economic topics.

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