08.11.24 13:39:30

Bonds: “Trump victory already anticipated”

The US election, the Fed meeting, the traffic light system going out - events came thick and fast this week. Yields rose sharply at first, but then there was a countermovement. In the corporate sector, bonds issued by large companies remain in demand.


8 November 2024 FRANKFURT (Frankfurt Stock Exchange). The reaction of the bond markets to Donald Trump's victory in the US election was clear: long-term yields rose. “The market is assuming higher inflation in the medium to longer term and therefore fewer interest rate cuts by the central bank,” says Commerzbank Chief Economist Jörg Krämer.

“Governments in both the USA and Europe will take on more debt,” explains ICF bond trader Arthur Brunner, also with a view to the failure of the traffic light government in Germany. “Interest rates at the long end are therefore likely to rise.” 

Steep rise, then countermovement

The yield on ten-year German government bonds peaked at 2.48% this week, but then there was a countermovement. By midday on Friday, it was back down to 2.39 percent. Ten-year US Treasuries yielded almost 4.5 percent at their peak and are currently at 4.31 percent. “The markets had already anticipated Trump's victory,” explains Brunner. The only surprise was the clarity and speed of the election result.

In addition to the US election and the traffic light exit, the US Federal Reserve meeting yesterday (Thursday) was also a topic of discussion. As expected, the central bankers lowered the key interest rate by 25 basis points to a range of 4.5 to 4.75 percent. In September, the rate cut was even larger at 50 basis points. The Fed also no longer spoke of “greater confidence” that inflation would move sustainably towards 2 percent, but it was making “progress” in this direction. 

Arthur Brunner

Brisk Treasury trading

Tim Oechsner from Steubing AG reports a lot of turnover in US Treasuries in view of the numerous news from the USA. Examples include bonds maturing in 2029 (US912828YS30), November 2025 (US91282CFW64) and 2052 (US912810TD00), which are currently yielding 4.08%, 4.70% and 4.61% respectively.

According to Brunner, the price of Argentinian government bonds has continued to rise. The price of the bond traded at ICF, which matures in 2038 and has a coupon of 4.25 percent, has now climbed to 57.20 percent. A year ago, it was still below 25 percent.  

Oechsner

No major pressure on auto bonds

Trading in corporate bonds has been quiet this week, according to traders. There was little turnover and hardly any selling pressure on automotive bonds - despite the tariffs on products from Europe announced by Trump. “Even hybrid bonds are holding steady,” says Brunner. The only exception: a VW bond maturing in 2028 with a coupon of 0.875% (XS2438616240), which lost slightly.

Fraport, Lufthansa, Mercedes and Eon in demand

According to Gregor Daniel from Walter Ludwig Wertpapierhandelsbank, three bonds from the aviation sector are well received, specifically from Fraport with a term until 2032 and a current yield of 3.64 percent (XS2832873355), Deutsche Lufthansa until 2028 and 3.20 percent (XS2892988275) and MTU Aero Engines until 2031 and 3.43 percent (XS2887896574). Also in demand at Steubing AG: Bonds from Mercedes (DE000A2DADM7), Hochtief (DE000A383EL9) and Eon (XS2673536541). A bond from the financial services provider 4Finance (XS1417876163) is also popular. It matures in 2028 and is currently yielding 10.17 percent.

Gregor

Calm on the new issues market

Companies held back on new issues this week, as Brunner reports. The new issue from Neue ZWL Zahnradwerk Leipzig with a coupon of 9.75 percent and a maturity date of 2029 (DE000A383RA4) is currently trading at 101 percent. “Turnover is thin, however.” According to Brunner, a bond from chocolate manufacturer Gubor with a term until 2029 and a coupon of between 7.5 and 8.5 percent (DE000A383SJ3) has been available for subscription since today. The subscription period runs until November 27. More information: www.boerse-frankfurt.de/gubor-schokoladen-gmbh.

From Anna-Maria Borse, 8 November 2024, © Deutsche Börse

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

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