As we approach the end of the first quarter of 2023, we sat down with Euwax AG's Head of Fixed Income Jens Furkert to take a closer look at some of the key bond trading trends for the year.
What is your overall outlook for the bond market in 2023? What factors are you considering when making this assessment?
The market environment for bonds in 2023 is quite exciting and dynamic. No comprehensive recovery of the global economy is expected this year. Instead, the picture is split in two: recession worries dominate in Europe and the USA, while the prospect of economic recovery is prevalent in China after the COVID-19 pandemic. Globally, the further development in the banking sector is of central importance for the economy.
In the short term, continued high inflation will have a significant impact on the bond market. The prevalent expectation of market participants was that central banks will continue to raise interest rates. This has changed after the Credit Suisse crisis. The interest rate cycle is expected to peak over the course of the year.
In the short term, continued high inflation will have a significant impact on the bond market. The prevalent expectation of market participants was that central banks will continue to raise interest rates. This has changed after the Credit Suisse crisis. The interest rate cycle is expected to peak over the course of the year.
What impact will this have on bond trading?
For retail investors wishing to invest in bonds, the coupons of newly issued bonds are likely to become even more attractive. Bonds with a good rating are increasingly seen as an alternative to overnight money and fixed-term deposits. This is particularly true in Europe, as the USA is already at a higher level in terms of interest rates.
Turnover in bond trading has already picked up recently. This trend is likely to continue in the event of further interest rate hikes and high market volatility.
Turnover in bond trading has already picked up recently. This trend is likely to continue in the event of further interest rate hikes and high market volatility.
How do you expect the ongoing shift towards sustainable finance and ESG investing to impact the bond market in 2023?
Last year, there was a boom in green bonds, especially in the primary market. This year, green bonds have been somewhat less in the focus of investors so far, also due to uncertainties regarding ESG classification.
In your opinion, how can the LuxXPrime trading platform benefit financial market participants?
As we have seen recently, volatility in the bond market has increased significantly. In this respect, I can emphasise that investors can rely on stable trading on LuxXPrime, with prices in line with the market. As EUWAX AG, we contribute our core expertise to LuxXPrime, ensuring price quality and high likelihood of execution for investors as a liquidity provider.
