Inflation-linked securities

Profile

Maturity: 5-year (inflation-linked Bobl) or at least 10- or 30-year (inflation-linked Bund)

Income: fixed annual interest payment + inflation compensation

Redemption: at least par value + inflation compensation

Price risk: medium, from 10-year maturity high

Liquidity risk: very low

Issuer risk: very low

Since the Federal Government’s entry into this market segment in 2006, the investor base, financing flexibility and spectrum of securities offered has been continually expanded. Based on the previous success achieved in the form of significant interest cost savings, one of the Federal Government's strategic goals is to build up the entire German Government security yield curve. Unlike the somewhat short and volume-heavy issuance tendencies for nominal yield bonds, inflation-linked bonds are initially placed in smaller volumes across a number of months, followed by smaller increases until each security approaches the benchmark figure of € 10 to 15 billion.

Inflation-linked German Government securities are now an established part of the Federal Government's financing strategy. Their share of total annual issuance volumes amounts to almost 4 % an average since 2006.

There are currently six inflation-linked German Government securities in circulation: one five-year note, four 10-year bonds and one 30-year bond.
After the original first inflation-linked 10-year Bund matured in April 2016 the inflation-linked 5-year Bobl maturing on 15 April 2018 is the first point on the German Government yield curve. The last point is the recently issued inflation-linked Bund maturing in 2046.

The six current tradable securities have a total volume of € 74.5 billion. This accounted for around 6 % of all German Government securities currently in circulation at the end of 2016, down from 7 % at year-end 2015.

Inflation-linked Securities as a proportion of currently tradeable Government debt

Primary market

The liquidity of index-linked securities is also increasing in parallel to the volume in circulation. The auctions generally take place on a monthly basis on Tuesdays, with the exception of August and December.

The ten auctions of inflation-linked securities in 2016 summed up to € 6.5 billion. A bidding volume volume of around € 8.9 bn and an allotted volume of around € 5.0 bn result in an average bid-to-cover ratio of 1.8. In April 2016 the first inflation-linked German Government bond matured and reduced the outstanding volume by € 15 bn.

 

The issues in the inflation-linked securities segment are an integral part of the Federal Government's strategic issuance planning. They should continue to take place on a monthly basis, with the exception of August and December. As a rule, they take place on the first or second Tuesday of each month. The announcement of the exact security and issuance volume will be published few days before the issuance date. No issue of a new inflation-linked Federal security is planned for 2017.

Inflation-linked German government securities as a proportion of total issuance volume in 2017

In contrast to the issuance volumes of nominal bonds which already had been fixed within the issuance calendar for the whole year, the issuance amount of the inflation-linked bonds is specified on a daily basis. Their share increases during the year with each new issuance of an inflation-linked bond (whereby the shares of the nominal bonds decrease slightly).

Secondary market

The outstanding volume and liquidity of inflation-linked securities have increased continually since they were first issued. The trading volume of indexed securities in 2016 totalled around EUR 175 billion (based on secondary market statistics from the Bund Issues Auction Group).
Thanks to the total volume of inflation-linked securities currently outstanding, the issuer can draw on a comfortably deep market, providing it with sufficient flexibility to support secondary market activities.

Currently tradeable inflation-linked Federal bonds and notes

Bond Maturity Coupon Outstanding last Auction ISIN
2015 (2046) iBund 15.04.2046 0.10 % 6,500 € m 12.09.2017 DE0001030575
2015 (2026) iBund 15.04.2026 0.10 % 12,000 € m 10.10.2017 DE0001030567
2014 (2030) iBund 15.04.2030 0.50 % 9,000 € m 04.07.2017 DE0001030559
2012 (2023) iBund 15.04.2023 0.10 % 16,000 € m 14.10.2014 DE0001030542
2011 (2018) iBobl 15.04.2018 0.75 % 15,000 € m 08.07.2014 DE0001030534
2009 (2020) iBund 15.04.2020 1.75 % 16,000 € m 10.02.2015 DE0001030526

The terms of issue for inflation-linked Federal securities are available within the security master data after clicking on the corresponding ISIN.

Indexation coefficients of inflation-linked Federal bonds and notes

Daily reference index & indexation coefficients base year 2015 (XLS)Daily reference index & indexation coefficients base year 2005 (XLS)

New HICP reference year

To reflect the conversion of the reference year for the HICP to 2015 = 100, the base indices of all our inflation-linked securities were adjusted per 02.03.2016 by using the following key:

 

We provide the base indices and indexation coefficients for download at the end of the page.