Bonds: “No sign of unrest”
Nvidia share price plunge, customs announcements, Bundestag elections - all this has (hardly) any impact on the bond market. The big topic here is the ECB meeting next week and the question of whether the “interest rate pause” will come now.
28 February 2025 FRANKFURT (Börse Frankfurt). Nervousness among tech stocks and crypto assets, but calm on the bond market. “There is no sign of unrest here, calm prevails,” reports Gregor Daniel, who trades bonds for Walter Ludwig Wertpapierhandelsbank. Arthur Brunner from ICF Bank also speaks of a quiet week: “A lot has happened in the world, but not on the bond market.”
US President Trump had announced that the tariffs of up to 25 percent against Canada and Mexico would actually come into force on March 4. The additional tariffs of 10 percent on imports from China are also due to come into force then. In addition, Nvidia's outlook has sent shares and the Nasdaq plummeting. Cryptocurrencies are trading well below their highs.
However, German government bonds, which are considered safe, are in demand: ten-year German government bonds were yielding 2.38% on Friday afternoon, well below the peak of 2.55% reached last week. US yields have also fallen and are at 4.25 percent after 4.66 percent in mid-February.
“ECB will almost certainly cut interest rates”
A further interest rate cut is firmly expected for the ECB meeting next Thursday. Last week, ECB Governing Council member Isabel Schnabel spoke of a possible pause in interest rate cuts. “The ECB will almost certainly cut interest rates, partly because many council members are worried about the weak economy,” explains analyst Marco Wagner from Commerzbank. “The sixth rate cut in a row is just around the corner: we expect the European Central Bank to cut its deposit rate by a further 25 basis points to 2.5 percent,” also predicts Ulrike Kastens, European economist at DWS. “However, the air for further rapid interest rate cuts seems to be gradually becoming thinner.”
“New Spain bond oversubscribed several times”
In the business with government and government-related bonds, interest in securities denominated in Turkish lira continues, as Daniel notes. One example: bonds from the European Bank for Reconstruction and Development maturing in 2027 (XS2756383233), which are currently yielding 32 percent. The inflation rate in Turkey has been falling since last summer, but in January it was still at 42 percent.
According to Daniel, Spanish long-term bonds, specifically those maturing in 2040 with a current yield of 3.41% (ES00000120N0), are always on the sell list. One reason for this could be the new issue of a Spanish bond this week. The new bond matures in 2041 and offers 3.5 percent (ES0000012O75). “The bond was oversubscribed several times,” explains Brunner.
Gregor Daniel
Wanted: Würth, Multitude and Abo Energy
In corporate bond trading, Daniel says that a Würth bond, which matures in 2030 and currently yields 2.44% (XS2480515662), is popular. He sees turnover on both sides for a Symrise bond maturing in November this year and currently yielding 2.67 percent (DE000SYM7720).
According to Brunner, the Nordic bond from Finnish financial services provider Multitude maturing in 2028 and currently yielding around 8 percent (NO0013259747) continues to be well received. The bond issued by the project developer for renewable energy plants Abo Energy with a yield of 7.75 percent until 2029 (DE000A3829F5) also remains in high demand, “despite the change of government”, as Brunner notes.
US dollar bonds also remain in demand: “Discovered” this week was a US dollar bond from John Deere with 4.95% until 2028 (US24422EXB00), as Daniel reports.
Arthur Brunner
By Anna-Maria Borse, 28 February 2025, © Deutsche Börse
About the Author
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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