Bonds: Market increasingly in “Christmas mode”
The ECB's decision did not have a major impact on the bond market. However, the federal government's debt plans for 2026 are causing interest rates to rise today. Meanwhile, the Christmas calm is gradually returning to trading.
19 December 2025. FRANKFURT (Deutsche Börse). No change at the end of the year: As expected, the ECB left key interest rates unchanged at its last meeting of the year yesterday (Thursday). There were no indications of imminent interest rate hikes. Instead, central bankers see themselves as well positioned.
“The ECB Governing Council meeting provided no indication of the direction in which key interest rates might move in the coming months,” explains Christian Reicherter of DZ Bank. If the outlook outlined by the central bank of an economic recovery without inflationary pressure is confirmed, key interest rates are likely to remain at their current level for some time to come. Commerzbank chief economist Jörg Krämer takes a similar view: “We continue to expect key interest rates to remain unchanged. The countries are heavily indebted, and the ECB Governing Council members are therefore extremely cautious about raising interest rates,” he explains.
Yields at elevated levels
Yields hardly moved after the meeting. More movement was caused by the announcement by the Federal Finance Agency yesterday, Thursday, that it intends to take on 512 billion euros in new debt in 2026, as reported by Arthur Brunner of ICF Bank. That would be another significant increase from the 425 billion this year. “Countries are getting deeper and deeper into debt, including the US. This is reflected in the yields.” Ten-year German government bonds yielded 2.88 percent on Friday afternoon – the highest level since March this year.
“Trading activity thins out”
Tim Oechsner from Steubing AG reports good sales for bonds issued by the European Stability Mechanism (ESM). These bonds are due in March and currently yield 2.45 percent (EU000A1U9944). However, with Christmas and the end of the year approaching, liquidity in the bond market has recently declined. “Numerous banks have already closed their books for the current year or are significantly reducing their trading activities,” he explains. Accordingly, market depth is declining, which is reflected in wider bid-offer spreads. “Overall, the market is increasingly switching into ‘Christmas mode,’ which is further thinning out trading activity and making it more difficult to execute orders.”
Tim Oechsner
Big names (almost) consistently in demand
However, Oechsner reports brisk sales for bonds issued by large German companies – from short to extremely long maturities. Bonds from Deutsche Bahn and Hochtief maturing in 2027 and currently yielding around 2.3 percent (XS2689049059, DE000A2YN2U2) are particularly popular . Securities with maturities between 2030 and 2035 and yields between just under 3 percent and just under 4 percent are also in high demand. Examples include Mercedes-Benz (DE000A3LSYH6), Deutsche Post (XS3229499101), RWE (XS2482887879), Bayer (XS2630111719), Würth (XS2911681083) and EnBW (XS2579293536). There is also a long-term bond: Deutsche Telekom's bond maturing in 2045, which currently yields 4.2 percent (XS2985250898).
Deutsche Telekom and Mercedes-Benz are also hot topics at Walter Ludwig Wertpapierhandelsbank, as Beate Mägerle reports. The Telekom bond maturing in 2032, currently yielding 3 percent (XS2987630873), and the Mercedes-Benz bond maturing in 2028, currently yielding 2.6 percent (DE000A169NC2). Also on the shopping lists of Walter Ludwig's customers: the Deutsche Pfandbriefbank bond maturing in 2028, currently yielding 3.4 percent (DE000A382665). On the other hand, Lanxess, maturing in October 2026 and currently yielding 2.5 percent (XS1501367921), is being sold off. Some currency bonds are also proving popular, as Mägerle notes, such as the Australian dollar-denominated bond from New South Wales (AU3SG0003270).
Schalke bond popular, Noratis down even further
The recently issued Schalke bond (DE000A460AT6) has performed well and has now stabilized at 102 percent, as ICF trader Brunner also reports. He sees good demand for the Mutares bond (NO0012530965), which runs until 2027 and offers a yield of 8.5 percent at prices of 102.3 percent.
Meanwhile, Noratis suffered further price losses. The Eschborn-based residential real estate developer had already decided on a comprehensive restructuring plan in November and, among other things, suspended interest payments on the corporate bond due in 2029 (DE000A3H2TV6). On Monday of this week, Noratis filed an application with the Frankfurt District Court to open protective shield proceedings. The share price fell to 10 percent.
By Anna-Maria Borse, 19 December 2025 © Deutsche Börse AG
About the Author
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock exchanges and economic issues.
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