Bonds: “Sentiment in the bond market can change quickly”

The deterioration in risk sentiment surrounding U.S. tech stocks has made government bonds more popular again. AI bonds are also no longer in such high demand. However, it remains uncertain whether the easing of tensions surrounding government bonds will continue.October 16, 2026. FRANKFURT (Deutsche Börse). First a sharp rise, then a sharp drop—yields took a roller-coaster ride this week. Midweek, unexpectedly high U.S. inflation of 3.7 percent fueled concerns about rising key interest rates, driving yields higher. Yesterday, Thursday, the trend reversed. Yields fell again.“The global sell-off in technology and AI stocks is boosting demand for government bonds,” notes Tim Oechsner, who trades bonds for Steubing AG. “The bond market saw solid safe-haven demand yesterday, triggered by the AI sell-off,” reports Metzler analyst Leon Ferdinand Bost as well. “No wonder, since the recent noticeable rise in government bond yields makes them all the more attractive amid doubts about the sustainability of the AI boom.”The yield on 10-year German government bonds stood at 3.42 percent on Friday afternoon, down from 3.47 percent a week ago and a peak of 3.65 percent at the end of September. The situation has also eased in the U.S. The yield on 10-year U.S. Treasury bonds currently stands at 5.09 percent, down from 5.24 percent a week ago.“No Evidence of a Sustained Trend Reversal”“This trading week shows how quickly sentiment in the bond market can shift,” Oechsner comments. The key factor remains the tension between persistent inflation and rising economic and credit risks. For bond investors, this continues to mean heightened volatility. At the same time, high yields are opening up new entry opportunities. “However, the current recovery is not yet evidence of a sustained trend reversal.”In trading government and quasi-government bonds, Oechsner reports strong trading volumes in European Union bonds ( ) and Italian long-term bonds ( ). Gregor Daniel of Walter Ludwig Wertpapierhandelsbank sees buying interest in a NordLB bond ( ).Arthur Brunner of ICF observes strong interest in currency-denominated bonds, particularly those in U.S. dollars, Australian dollars, and Norwegian kroner. “The higher yields are attractive, as is the euro’s recent weakness.” One example: a Norwegian government bond denominated in kroner maturing in 2029 and currently yielding 4.76 percent ( ). Doubts, Especially About Highly Indebted AI CompaniesIt wasn’t just AI stocks that came under pressure this week—bonds issued by AI companies did as well. “Investors are taking an increasingly critical view of high debt levels,” notes Oechsner. As Commerzbank reports, these concerns are particularly evident in the securities of highly indebted companies such as cloud computing provider CoreWeave ( ). “Here, the cost of a five-year credit default swap (CDS) rose by 220 basis points to 1,117 basis points within a week.” Tim Oechsner Major German Companies in DemandMeanwhile, well-known German names remain in demand. Gregor Daniel sees buying interest in BMW bonds maturing in 2031 with a current yield of 3.94 percent ( ) and Deutsche Pfandbriefbank bonds maturing in 2028 and 2029 with yields of 4.48 and 4.62 percent ( , ). Oechsner reports strong trading volumes for bonds issued by Evonik ( ), Siemens ( ), Würth ( ), E.ON ( ), and Deutsche Bahn ( ).PNE Under Pressure, Katjes International PopularThe fact that wind and solar project developer PNE has lowered its forecast for fiscal year 2026 led to price declines for both bonds, as Daniel further explains. The bond maturing in 2027 is trading at 97 percent on Friday morning ( ), while the one maturing in 2031 is trading at 93 percent ( ). “The stock has been hit harder,” Daniel notes. Brunner reports strong demand for the Katjes International bond maturing in 2028 ( ).For the planned Katjesgreenfood corporate bond maturing in 2031, the interest rate has now been set at 8 percent, in the lower third of the originally communicated interest rate range of 7.75 to 8.50 percent ( ). By Anna-Maria Borse, October 16, 2026, © Deutsche Börse AG About the Author 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: “Sentiment in the bond market can change quickly”

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