The global economy slowed down in 2019. This was largely due, among other factors, to the international tension surrounding trade, political conflicts and the uncertainty associated with Brexit.
2019 was another year characterized by a loose, expansive monetary policy. The euro area economy lost momentum in the course of 2019. Consumer prices are not expected to increase to any considerable degree, and nor is any end to the low interest rates in the euro area in sight.
Despite the fact that the asset purchase program launched by the European Central Bank (ECB) expired at the turn of 2018/2019, the euro area remained characterized by a stable interest rate environment in 2019. The ECB did, however, continue to reinvest payments from maturing bonds in further asset purchases even after this date. In September 2019, the ECB cut the deposit rate from -0.4% to -0.5% and announced that it would be reinstating the asset purchase program in November 2019, with a monthly amount of € 20 billion. It did not set an end date for the purchase program. In addition, payments from maturing bonds are still being reinvested.
The yield on ten-year German Federal bonds fluctuated in 2019 and has been negative since May 2019.
The Federal Reserve Bank (Fed), the world’s largest central bank, made a radical change to its monetary policy course within a few months, completing a swift turnaround from a tight to a loose monetary stance. This also means that the Fed has been purchasing bonds again since October 2019 in response to the economic downswing in the United States, a purchase program that it intends to continue at least until the second quarter of 2020. The Fed had also lowered its key interest rate three times in a row, starting in July, by 0.25 percentage points in each case, and recently signaled that rates would be left on hold. At the moment, the Fed has opted to stick with its interest rate corridor of between 1.50 and 1.75 percent.
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. For the very first time Vonovia was awarded a rating of A- with a stable outlook by the Berlin-based Scope group, the market leader among Europe’s rating agencies, on December 13, 2019.
Our first-class credit rating continues to give us unrestricted access to the international capital markets. With an average issue volume of € 3.0 billion a year between 2015 and 2019, we rank 14th out of the world’s top 15 EUR investment grade issuers based on analyses performed by Dealogic.
Successful Financing Measures in 2019
2019 was a more successful year on the financial markets than expected for all asset classes despite disappointing development for economic indicators and the prevailing political tension.
The global investment demand among investors remained high due to the economic environment and the expansive monetary policy pursued by many central banks. In spite of global tensions, such as trade wars and the ongoing uncertainty surrounding Brexit, risk premiums on the bond markets stabilized at a low level in the second half of the year. This trend also had an impact on Vonovia’s bonds.
In 2019, Vonovia placed an issue volume of € 3.0 billion in total on the primary market (2018: € 3.6 billion) at aweighted average interest cost of 1.13% by volume (2018: 1.45% p. a.). The average maturity of the bonds we issued was 10.5 years in 2019 (2018: 9.3 years). This means that we were able to make active use of the attractive market environment in 2019 in order to extend our average maturity and further smoothen our maturity profile.