The week ushers in Donald Trumps second term in the White House with the inauguration scheduled for today. Following his election victory, investors re-assessed the inflation- and rates outlook, causing elevated volatility and a resulting re-pricing on bond markets. Now, markets will keep an eye on which promises he will actually follow through right away, resulting in some potentially volatile days ahead. In an otherwise data-light week, with flash PMIs for the euro area and the US due on Friday, primary market flows should seemlessly carry over from last week. Today's Martin Luther King Jr. Day keeps US markets closed. |
The primary market was once again receptive and with a well-filled deal pipeline, sufficient supply is also ensured for today. Corporate issuers, however, remain on the sideline. On the secondary market, inflation and interest rate risks continue to weigh on sentiment, which is also gradually being reflected in credit sentiment. RAGBs held their own yesterday despite Fitch's negative outlook. US producer prices are on the agenda today, ahead of tomorrow's focus on US inflation figures. |
A multitude of risk factors clearly outweigh the positives for 2025. The industry is dealing with elevated inventory levels going into the year, which suggest the supply/demand dynamics will have to adjust further at the cost of OEM's profitability. Potential US tariffs and tougher CO2 targets in the EU bring along further downside risks. Against this backdrop, we maintain the negative outlook and flag a highly uncertain year ahead. |
2024 will go down in the books as the year of green bonds. We also expect the asset class to continue to dominate in 2025, with the SSA segment potentially driving issuance volumina. The launch of the EuGB standard marks the birth of another green bond asset class. As established Green Bond issuers with comparably high EU Taxonomy alignment, Utilities and Real Estate issuers appear to be natural frontrunners, although we expect initial interest and therefore volumes to be limited. |
What will 2025 bring? At least two things seem certain – a lot of “Trump drama” and a lot of “volatility”. We got a taste of this yesterday when the markets got what the Fed had been forecasting for weeks, but it still led to very significant corrections in the equity and bond markets. Nevertheless, we expect a constructive start to the year 2025. For risk-seeking and volatility-resistant investors, we still see potential in US equities, while for volatility-sensitive investors, European IG corporate and bank bonds are currently attractive in our view. |