In 2017, the international financial markets were characterized by a favorable economic outlook and the expectations of market participants regarding monetary policy. In the euro area, the European Central Bank’s decision to continue the securities purchase program until at least September 2018 laid the foundation for a stable interest rate environment on the whole. The yield on ten-year German Government bonds fluctuated in 2017, but without any sustained trend towards higher market interest rates.
In the U.S., the markets were dominated by expectations regarding the planned tax reform, which was implemented at the end of the year, and by the Federal Reserve’s announcement that it would be reducing its total assets. The Federal Reserve’s plans mark what is now likely to be the last phase in its bond purchasing program.
Political uncertainty surrounding the North Korea conflict, the ongoing Brexit negotiations or Catalonia’s push for independence only played a minor role for market participants with a limited regional impact.
One of the World’s Biggest Capital Market Issuers
The rating agency Standard & Poor’s has assigned Vonovia a long-term corporate credit rating of ‘BBB+’ with a stable outlook and a short-term credit rating of ‘A-2’. Our first-class credit rating gives us unrestricted access to the international capital markets, on which we were able to establish ourselves within a short period of time. With an average issue volume of € 2.8 billion a year between 2015 and 2017, we rank 11th out of the top 15 euro-investment grade issuers based on analyses performed by Dealogic.
Successful Financing Measures in 2017
The global investment demand among investors remained high due to the positive economic environment and the expansive monetary policy pursued by many central banks. As a result, there was also high demand for the bonds placed by Vonovia in the past on the secondary market. This was reflected in a further drop in risk spreads. In 2017, Vonovia was able to place an issue volume of € 2.0 billion in total on the primary market (2016: € 2.5 billion) at an extremely attractive volume-weighted average interest cost of 0.91% p. a. (2016: 1.00% p. a.). In order to increase its flexibility as far as refinancing strategies are concerned, Vonovia implemented a commercial paper program with an issue volume of up to € 500 million in 2017. Details on the financing portfolio can be found in the notes to the consolidated financial statements.