FRANKFURT (DEUTSCHE-BOERSE AG) – The central bankers are not letting up, they keep making it clear that the rise in key interest rates will continue. The slump in the stock market is causing investors to flee to “safe havens”.
March 10, 2023. FRANKFURT (Frankfurt Stock Exchange). The central banks continue to set the pace. This week it was US Federal Reserve Chairman Jerome Powell who dashed hopes that interest rate hikes would end soon. Powell told the US Senate Banking Committee on Tuesday that interest rates could rise faster and higher than previously expected and could stay there for longer.
“Even the ADP report with labor market figures and the Beige Book give no reason to doubt the Fed’s fundamental intention to raise interest rates,” comments Ralfcircul from Helaba. In the euro zone the head of the French central bank, Francois Villeroy de Galhau, recently spoke out in favor of further decisive action against inflation.
Price slide on the stock market, bonds in demand again
“The bond markets went into hiding,” reports Arthur Brunner from the ICF Bank. On Thursday evening, however, things suddenly looked different again: The collapse of the crypto bank Silvergate Capital and the price crash of the financier of tech companies SVB Financial caused nervousness to explode. Looking at Wall Street, Bloomberg speaks of the “biggest sell-off in the banking sector in almost three years”. The reason: The events showed the consequences of higher interest rates. Investors react by fleeing to safe havens.
Ten-year federal bonds yielded 2.74 percent this week, on Friday morning it was only 2.47 percent again. The yield on two-year Bunds peaked at 3.38 percent and is now 3.08 percent again.
Investors who want more, for example, rely on Romanian bonds, as Brunner notes. A bond running until 2028 with a coupon of 2.875 percent (XS1420357318) is required. The yield is currently 5.7 percent.
Good sleep thanks to government or investment grade bonds
Corporate bonds were still in demand this week – if they are rather short and come from “good” addresses. “Why expose yourself to this very data-dependent, news-driven stock environment when you can sleep well at night with short-dated government or investment-grade bonds,” said Charlie McElligott of Nomura Securities, as reported by Bloomberg Portfolios with up to 50 percent short-dated bonds from blue-chip companies “In the short term, cash and investment-grade corporate bonds are the best way to position yourself,” Generali Investments’ Thomas Hempell is quoted as saying.
“That’s what we’re also seeing,” comments Gregor Daniel from Walter Ludwig Wertpapierhandelsbank. “Corporate bonds with short and medium maturities are well received, those with long maturities are not.”
Eon, Symrise and Grenke on shopping lists
Daniel sees purchases for an Eon bond maturing in 2028 with a coupon of 3.5 percent (XS2574873266), a bond from the fragrance and flavor specialist Symrise with a 1.25 percent maturing in 2025 (DE000SYM7720) and a bond from Grenke Finance maturing in 2025 and Coupon of 0.625 percent (XS2078696866). “At Grenke, this corresponds to a return of 5.96 percent at a price of 91 percent,” notes Daniel. Brunner reports purchases of Fresenius Medical Care bonds with a coupon of 3.875 percent and a maturity in 2027 (XS2530444624).
Also on the shopping lists: the high-yield bond of the Finnish financial service provider Multitude (formerly Ferratum) with 9.563 percent until 2025 (NO0012702549). Brunner sees purchases and sales for bonds from the solar company Greencells at 6.5 percent by 2025 (DE000A289YQ5) and the French care group Orpea at 2.625 percent by 2025 (FR0013322187). “There are always rumors about a restructuring at Orpea.”
New “green” bond from Sowitec
A new green bond from the Sowitec Group (DE000A30V6L2), a solar and wind power developer from Sonnenbühl in Baden-Württemberg with a focus on South America, is still available for subscription on the stock exchange until March 28th. This offers 8 percent per year and runs for five years, with a minimum investment of 1,000 euros.
More on this at boerse-frankfurt.de/sowitec-group-gmbh
by: Anna-Maria Borse, March 10, 2023, © Deutsche Börse AG
(Deutsche Börse AG is solely responsible for the content of the column. The articles are not an invitation to buy or sell securities or other assets.)