The fact that bond investors are currently having a difficult time is by no means a new finding.

In 2019, the federal government issued a bond for the last time on which it pays interest.

And due to the fact that the central banks are currently buying up a large part of the bonds, the bond market has taken on the impression of a state-regulated market and let their prices rise.

That, and the fact that interest payments were mostly negligible, gave bonds a risk that was comparable to that of stocks, if not higher.

Martin Hock

Editor in business.

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The developments for interest savers - keyword penalty interest - seem grotesque at times.

If you invest 4,000 euros for a year at a negative interest rate of 0.5 percent, you pay 20 euros in interest.

You can also buy and sell a bond in order to get the same result (without a price gain).

Suddenly, bonds are interesting as a money parking lot.

But it cannot be overlooked that the undead state of the bond market also affects the primary market, i.e. the underwriting business.

Because issues that are legally or practically possible for private investors appear to be becoming increasingly rare.

Without the Landesbanken, the selection of bonds, for which you have to shell out at least 50,000 or 100,000 euros, would often look rather thin.

No Crocs for retail investors

In the end, this week, in addition to Bremen with one and VW with three bonds (with interest coupons from 0 to 0.375 percent), it is mainly thanks to the Landesbank Hessen-Thüringen that there are some private investor-friendly bonds. Helaba offers a total of six euro bonds with coupons of 0.2 to 0.65 percent with terms between eight and 15 years - plus a six-year dollar bond with 1 percent interest that private investors (hopefully) buy be able.

In contrast to all the bonds from interesting American companies such as the plastic slipper manufacturer Crocs, which with a rating between “BB” and “B” is offering 4.125 percent annually for ten years. But because Crocs can terminate in the first five years and thus the yield of the bond is not certain, these are considered dangerous for private investors in this country, as long as they are not explicitly notified in writing under European law.

The calculation of the return is not uncomplicated: Outstanding interest and repayments are discounted with the return on the American government bond plus a premium of 0.5 percent. That's higher finance math. It's worth it though. Because the bond yield on termination will always be at least as high as on the due date, because the investor will get at least the nominal value back.

At the current level of government bond yields, for example, the yield on the Crocs bond would increase from 4.125 percent to just under 6 percent on termination in 2026 compared to the end of the term. In order for investors to win nothing in this interest rate bet, the yield on the government bond would have to rise to more than 3.6 percent. The advantage of the issuer is that he can sell a bond at a higher price with this so-called make-whole clause. 70 percent of the dollar bonds offered this week have this clause. 16 percent can be canceled with a special payment without this bonus.

Incidentally, there has been a veritable flood of dollar bonds in the past few days. Apparently, issuers fear rising interest rates and want to take advantage of the current low again. And since the interest bonus on termination also shrinks when interest rates rise, there will probably be more than fewer make-whole clauses.