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Euro am Sonntag fund tips: Confidence in interest rate papers: what is particularly important for corporate bonds | message


by Thomas Strohm, Euro on Sunday

So Companies have never collected a lot of money with euro bonds. They issued papers with a volume of EUR 330 billion in the first half of the year, whereby the financial sector is not even taken into account. With a share of 86 percent, companies with good credit ratings ensured the record volume.

“We continue to expect lively new issuance by companies that have increased cash requirements in the wake of the corona crisis and are looking for early refinancing,” says LBBW analyst Matthias Schell. This is countered by strong demand from investors for new corporate bonds, supported by the ECB, whose purchase program also includes investment-grade bonds.

“Due to the support from the central banks, corporate bonds are currently one of the most interesting segments in the bond market,” says Ernst Konrad, fund manager at Eyb & Wallwitz. They would have a higher correlation to the stock market than government bonds or covered bonds. With the economy and corporate earnings, a V-shaped recovery can be seen. And if the companies are doing better again, share and bond prices will rise.

The sell-off in March was primarily driven by liquidity. “There were massive outflows of capital, the market had dried up, so every sell order resulted in a significant drop in prices,” explains Konrad. That had changed when the ECB program ensured liquidity in the market. Corporate bond prices have recovered. “But I don’t see any exaggeration. The risk premiums for investors are not yet as low as in early 2020,” says Konrad.

In March everything was sold, including bonds from issuers with good credit ratings, because there was most likely a liquid market. Now it is more differentiated and looked at how an industry is affected. That is reflected in the courses. Tourism, aviation, logistics, trade or gastronomy would have major problems. “A TUI bond is therefore not an option for our funds, despite double-digit yields. However, we remained invested in the subordinated loan from Lufthansa,” says Konrad.

Resist temptations

The situation and prospects are better in other sectors, but these bonds have also been temporarily blocked. “We used this to buy from the Italian toll road operator Autostrade. We also bought bonds from the automotive supplier ZF Friedrichshafen, which lost its investment grade rating due to the Corona crisis, for our Phaidros Fallen Angels,” said Konrad. Most recently, he has accessed subordinated coco bonds issued by systemically important banks from southern Europe, such as Intesa Sanpaolo or Caixa.

Berenberg’s chief investment strategist Bernd Meyer also sees the risk premiums currently offered for corporate bonds as attractive despite the price recovery. “We prefer defensive industries like telecommunications, pharmaceuticals or utilities,” said Meyer. On the other hand, the temptation must be to resist the high yields in the areas particularly affected by the crisis.

Ercan Demircan, fund manager at Bantleon, expects the risk premiums of European corporate bonds of Bonitt Investment Grade to decrease towards pre-crisis levels in the coming months: “The prospect of price gains offers attractive opportunities to enter the corporate bond market, in addition to still relatively high coupons . ”


Image sources: StockThings /, Sebastian Duda /, Finanz Verlag

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