Bonds: Central Banks as Expected, but Volatility Persists

This time, the central banks held off on action. However, given the high inflation rates, further interest rate hikes are expected—even as late as 2026 and 2027 for the ECB. Meanwhile, some SME bonds have lost significant value, such as Homann and PNE.October 30, 2026. FRANKFURT (Deutsche Börse). Interest rate decisions by the ECB and the Fed, followed by the announcement by ECB President Christine Lagarde that she would step down in February—the week was all about the central banks. Both the European and U.S. central banks left their key interest rates unchanged. This was in line with market expectations. Lagarde’s resignation also came as no great surprise. The Dutchman Knot and the Spaniard de Cos are considered the frontrunners to succeed her.“The Fed’s and ECB’s decisions were expected, but they nevertheless contributed to increased volatility in the financial markets,” explains Helaba analyst Ralf Umlauf. The ECB, in particular, was perceived as relatively “dovish”—that is, inclined toward fewer interest rate hikes. The market currently prices in an approximately 80 percent probability of a rate hike in December. “However, expectations for 2027 have been scaled back.”An interest rate hike is also expected from the Federal Reserve in December. Metzler Research, however, assumes that this will mark the end of the rate hikes. “The Fed might even start looking toward rate cuts again by the end of next year,” explains Leon Ferdinand Bost. “Decision on ECB Leadership Is Politically Motivated”Tim Oechsner of Steubing AG discusses the leadership change at the ECB. He says the decision is politically motivated. “What’s important, however, is that the new leadership acts independently. Especially in times of high government debt, confidence in monetary policy is crucial.”Tim Oechsner Yields on 10-year German government bonds have continued to pull back from their September highs of over 3.60 percent. On Friday morning, they stood at 3.34 percent, down from 3.36 percent a week ago. The yield on 10-year U.S. Treasuries also continued to decline and currently stands at 4.93 percent, down from 4.97 percent a week ago. The situation in France has also calmed down somewhat. Ten-year French government bonds are now yielding 4.93 percent, well below last week’s highs of around 5.10 percent. One reason: the rating agency Moody’s has decided not to downgrade France’s rating from Aa3 to A1 after all.Well-Known CompaniesIn the corporate bond sector, bonds issued by MTU Aero Engines maturing in 2031 with a current yield of 3.88 percent ( ) are popular, as reported by Gregor Daniel of Walter Ludwig Wertpapierhandelsbank. Mercedes-Benz bonds are also being bought despite a lowered earnings forecast. These bonds, maturing in 2031, currently yield 3.84 percent ( ).Oechsner reports strong sales of bonds issued by Fraport maturing in 2027 ( ), Evonik maturing in 2028 ( ), and Fresenius ( ), Volkswagen ( ), and Würth ( ) maturing in 2031. Yields range from 3 to 4.3 percent.Share Price Plunge for Homann and PNESteubing AG also saw strong trading volume in HMS Bergbau ( ). The bond issued by Homann Holzwerkstoffe ( ) plummeted rapidly, as Walter Ludwig-Händler Daniel reports. The price fell from 86 to a low of 48 percent. “There is no news on this.” Bonds issued by PNE, a project developer and operator of renewable energy solutions, also suffered heavy losses “for no apparent reason.” The bond maturing in 2027 fell from 97 to a low of 78 percent ( ), while the one maturing in 2031 dropped from 92 to 75 percent ( ). “However, this isn’t a trend affecting all SME bonds,” notes Daniel. Many remained very stable, such as DEAG Deutsche Entertainment ( ), Karlsberg Brewery ( ), Semper idem Underberg ( ), and Formycon ( ). New Katjesgreenfood Bond Proves PopularAccording to Oechsner, there is also a lot of interest in Katjesgreenfood’s new 8 percent bond maturing in 2031 ( ). Following the successful placement of the new bond yesterday, Thursday, the company called the old bond maturing in 2027 ( ) as scheduled on November 30. The call applies to all outstanding bonds that were not exchanged as part of the exchange offer. Redemption will take place on November 30 at 101.00 percent plus interest accrued through that date.Oechsner also reports strong trading volume in the new 7 percent bond maturing in 2031 issued by UBM Development, a developer of timber construction projects ( )Daniel also notes interest in Turkish lira-denominated bonds issued by the International Finance Corporation ( ), the development bank that is part of the World Bank Group. These bonds currently yield 36 percent; however, inflation in Turkey remains very high. By Anna-Maria Borse, October 30, 2026, © Deutsche Börse AG Über die Autorin Anna-Maria Borse is a finance and business editor specializing in financial markets, the stock market, and economic issues.Feedback and questions to live@deutsche-boerse.com

Bonds: Central Banks as Expected, but Volatility Persists

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