14/03/25 13:47:26

Bonds: “Investing in all maturities”

The sharp rise in yields is motivating investors to buy German bonds. This is reported by traders on the Frankfurt Stock Exchange. If politicians agree on the planned debt package in the coming week, the trend could continue.


14 March 2025 FRANKFURT (Börse Frankfurt). Investors' eyes remain focused on political decision-makers. “In recent days, both the development of German government debt and geopolitical tensions have played a role in the movement of bond markets,” explains Tim Oechsner from Steubing AG. Increasing concerns about rising government debt due to the planned financial packages in Germany have therefore led to a sharp fall in Bund futures to around 126.50 points and a significant rise in yields.

Steep yield curve in Germany

“The yield on 10-year German government bonds is approaching the 3.0 percent mark,” states Raffaele Antacido from ICF Bank. The trader refers to the concerns of finance ministers in the EU about a major sell-off on the bond market if highly indebted countries also increase their security spending. Since the end of February, the 10-year yield has risen from 2.40 to 2.90 percent, its highest level since October 2023. Two-year bonds have “only” risen from 2.00 to 2.20 percent. “The yield curve on the German bond market has become even steeper,” notes Antacido.

The further development 'of yields is now likely to depend on whether the planned fiscal package of the CDU and SPD gets the required two-thirds majority in the German Bundestag. According to Ilona Korsch from Hauck Aufhäuser Lampe, there should be “an agreement and adoption with the votes of the Greens” on Tuesday. However, the analyst also points out that the recent rise in yields has been very rapid. “Investors could therefore take a breather for the time being”.

Fall back into sideways range or breakout towards 4 percent

However, if the planned billion-euro investments are postponed for the time being, a rapid counter-reaction on the markets cannot be ruled out, warns Klaus Stopp from Baader Bank against too much euphoria regarding the rise in yields. In such a scenario, according to chart technician Marcel Mußler, the focus would shift to last year's high of 2.707 percent for the ten-year yield. If this support level is broken, a continuation of the “bleak long-term sideways range” threatens. Above 3.02 percent, there would no longer be any “outstanding long-term resistance”. 

Klaus Stopp

According to Jörg Scherer from HSBC, the “real technical surprise potential” begins beyond this multi-year high from October 2023. The price trend of recent years would then have to be interpreted as a “sideways sliding zone” between 2 and 3 percent. “Accordingly, a resolution of this consolidation pattern would activate a price target in the region of 4 percent,” explains the technical analyst.

Higher yields entice investors to enter the market

Investors on the Frankfurt Stock Exchange are increasingly taking advantage of the recent fall in corporate bond prices to enter the market. “Investors are happy to accept the rising yields,” notes Gregor Daniel from Walter Ludwig Wertpapierhandelsbank. Investments are being made “in all maturities”. He is looking for a Mercedes-Benz bond maturing in 2027 (DE000A2R9ZU9), an RWE bond maturing in 2029 (XS2584685031), a Deutsche Telekom bond maturing in 2032 (XS2987630873) and an E.On bond (XS2791960664) maturing in 2044. The yields on these securities range from 2.5 to 4.4 percent.

Gregor

The bonds on Siemens (DE000A1UDWN5), Hochtief (DE000A2YN2U2) and BMW (XS2982332319), for which Oechsner reports strong demand, are also in this range. According to Antacido, a 10-year (DE000BU2Z049) and a 25-year German government bond (DE0001102481) in particular are being “heavily traded” in the government bond segment. While the longer-dated paper is “more likely to be given”, the 10-year bond is “more sought after”. The price here has fallen from 100 to 97 percent within two weeks.

By Thomas Koch, 14 March 2025, © Deutsche Börse AG

Thomas Koch is a CEFA investment analyst, investment specialist for structured products and a certified certificate consultant. He has been a freelance journalist covering events on the capital markets since the beginning of 2006.

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