Bonds: “Peace Expected”
There is widespread confidence that the war in Iran will soon come to an end. The high yields driven by inflation fears are a thing of the past. Even the volatile market for high-yield corporate bonds appears (almost) unaffected.
April 17, 2026. FRANKFURT (Deutsche Börse). Hopes for a swift end to the war in Iran are boosting sentiment. “Market participants are currently banking on a lasting peace agreement in the Middle East and on the Strait of Hormuz soon becoming navigable again,” explains Helaba analyst Ulrich Wortberg. While oil and gas prices remain elevated, risk appetite has increased overall.
While stock market prices continue to rise this week, bond markets are moving sideways. “The bond markets are stable,” notes ICF trader Arthur Brunner. The yield on 10-year German government bonds stood at 3.03 percent on Friday afternoon, roughly the same level as the previous week. Two-year bonds are yielding 2.51 percent, also roughly the same as last Friday. In March, the peaks were 3.13 percent and 2.77 percent, respectively.
“ECB Seems to Want to Wait and See for Now”
Speculation continues regarding how the ECB and the Federal Reserve will respond to rising inflation: The market now expects the ECB to raise interest rates twice by the end of the year. “The prevailing view in the market is that the ECB will keep its hands off the rate at its next meeting in late April,” explains Leon Ferdinand Bost of Bankhaus Metzler. The minutes released yesterday, Thursday, for the March meeting underscored this wait-and-see stance. “Basically, the ECB seems to want to wait and see whether the Iran shock leads to second-round effects on inflation.”
Federal Bonds: No Longer as Popular
Meanwhile, the sharp rise in government debt in many industrialized nations is not without consequences, as Brunner has observed. “The latest issuance of German government bonds was again undersubscribed,” he notes. For the €5 billion increase in a bond maturing in 2031 with a 2.5 percent coupon (DE000BU25067), there were bids totaling only €4.1 billion. “There has been no oversubscription since early March.”
Arthur Brunner
“Trading volumes are sluggish”
The corporate bond market is relatively quiet. “Trading volumes are sluggish; there’s a lack of momentum,” reports Gregor Daniel of Walter Ludwig Wertpapierhandelsbank. He notes buying and selling activity for the Deutsche Pfandbriefbank bond maturing in 2028, which currently offers a yield of 4.15 percent (DE000A382665). “There are no major market movements,” notes Marcus Mielert of Oddo BHF as well. The strike, feared kerosene shortages, and the closure of Lufthansa subsidiary Cityline had no impact on Lufthansa bonds.
High-yield bonds are holding up “surprisingly well”
According to Brunner, the market for high-yield bonds is holding up “surprisingly well.” “It is assumed that the closure of the Strait of Hormuz is temporary.” This is reflected in the iTraxx Crossover, the sentiment barometer for credit risks of companies below investment-grade ratings. Currently at 285 points, it signals a easing of tensions. “At the end of March, it was still at 360 basis points, and in 2022, due to the war in Ukraine, it even reached 670 basis points.”
In the high-yield bond sector, the new bond issued in March by the online credit broker Multitude is well received (NO0013726893), as Brunner also reports: “The bond launched at 96.5 percent; now it’s at 103.25 percent. And trading volumes are strong.” The old Multitude bond maturing in 2028 (NO0013259747) is also in demand.
Bonds issued by the investment company Mutares (NO0012530965, NO0013325407) remained stable following the announcement of a capital increase. “Both bonds are trading at 102 percent,” notes Brunner.
Walter Ludwig trader Daniel sees both buying and selling activity for Homann Holzwerkstoffe bonds maturing in 2032 with a current yield of 7.42 percent (NO0013536169). The Latvian airline Air Baltic remains severely battered. It is struggling with flight cancellations and rising fuel prices as a result of the war in Iran. The bond is trading at a 40 percent discount, which yields a return of just under 55 percent given its maturity in 2029 (XS2800678224).
By Anna-Maria Borse, April 17, 2026 © Deutsche Börse AG
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Anna-Maria Borse is a finance and business editor specializing in financial markets, the stock market, and economic issues.
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