January is one of the months with the highest number of new issues on the bond market.

This year, too, states and banks used the first working days to finance themselves at the still low interest rates.

In view of the growing concerns about inflation, many market participants are expecting interest rates to rise soon.

The representatives in the US Federal Reserve, who have so far been among the proponents of low interest rates, are now tightening the tone.

Markus Frühauf

Editor in business.

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Neel Kashkari, President of the Minneapolis Fed, expects two rate hikes this year because inflation is more permanent and higher.

This is also reflected in the yields on US and German government bonds that have risen in recent weeks.

The yield on the ten-year Treasury was still trading well below 1.4 percent at the beginning of December; on Wednesday it was 1.65 percent.

The yield on ten-year government bonds approached the mark of minus 0.4 percent at the beginning of December, now it is minus 0.09 percent.

32 banks in the bidding round

On the bond market, rising yields mean price losses. This explains the rather subdued demand for the new ten-year federal bond that the German state issued on Wednesday through its finance agency, which is responsible for debt management. The title over 4 billion euros was in demand with 4.6 billion euros. Of this, the finance agency allocated 3.13 billion euros, and kept the remaining 870 million euros to maintain the market. These stocks are later sold on the market. At minus 0.09 percent, the average return was at the current market level, which is more important to the finance agency than very high demand for new issues.

In the auctions, in which the 32 banks of the Bund Issues bidding group take part, demand is mostly rather low, as is the case now.

In exceptional cases, the federal government has resorted to the syndicate procedure in recent years, in which selected banks specifically address investors and thus usually generate very high demand.

However, from the taxpayer's point of view, the syndication process is more expensive than the auctions.

The state development bank KfW also used a new ten-year bond from a syndicate made up of Barclays, BNP Paribas, Deutsche Bank and JP Morgan for its issue.

The result was record demand of 33.5 billion euros with an issue volume of 5 billion euros.

Deutsche Bank has also raised a total of $ 3 billion in the US bond market through two debt instruments. "The high demand shows that Deutsche Bank is in great demand with investors," said Dixie Josh, who, as Head of Treasury, is responsible for group financing. The two titles were in demand for $ 8 billion, although they are not among the bank's best-protected bonds (senior preferred). The ten-year issue of $ 1.25 billion is even subordinate and is liable to other bonds in the event of imbalances. With 2.1 percentage points on the yield of the corresponding US government bonds, Deutsche Bank recorded the lowest risk premium in more than ten years.

She sees this as a reward for the upgrades by the major rating agencies in the past year.

This can also be seen in the falling risk premium for securing a claim, the so-called credit default swap (CDS).

This only costs investors an annual premium of 450 euros for a claim of 100,000 euros from the bank.

After the Corona crash in spring 2020, 1700 euros were necessary.