Equity-linked market players are widely predicting that Allianz, the giant German insurer, will use a hefty exchangeable bond deal to offload some of its stake in E.ON, the German energy utility.

Allianz, which has confirmed it is in talks with E.ON with a view to reducing its 10.2% stake to below 5%, could launch a bond exchangeable into shares in E.ON worth well over €2bn ($2.3bn), based on the current market value of Allianz's stake, according to sources familiar with the company.