Bantleon identifies rising return potential in industrial hybrid bonds
Hermann Bantleon GmbH reports that industrial hybrid bonds offer attractive yield prospects over the next 12 to 18 months despite geopolitical volatility.
Industrial hybrid bonds have demonstrated significant resilience amid geopolitical instability and rising government bond yields. According to Michael Hess, head of corporate bond portfolio management at Bantleon, the combination of solid issuer fundamentals and strong demand creates a positive outlook for the asset class over the coming 18 months.
While rising interest rates earlier in the year caused some volatility, risk premiums for corporate hybrids remained stable compared to senior investment-grade debt. The market has matured, with investors demonstrating a deeper understanding of issuer incentives, which has mitigated traditional concerns regarding subordination and coupon structures. Recent primary market activity has seen high oversubscription rates, reflecting strong institutional appetite.
Bantleon notes that industrial hybrid bonds now offer a more favorable risk-adjusted profile compared to bank-issued AT1 bonds. Given current market dynamics, the firm anticipates a base-case total return of approximately 8.3 percent over the next year, supported by a focus on defensive sectors such as energy and telecommunications.