Investment in German Government Securities

The market for German Government securities is widely regarded as liquid, straightforward and clearly structured. Divided into money market and capital market instruments, German Government securities offer original maturities ranging from three months  to 30 years. In the money market segment, the Federal Government issues Treasury discount paper (“Bubills”) with maturities of six and twelve  months. The offering of capital market products begins with Federal Treasury notes (“Schaetze”) with a maturity of two years, followed by five-year Federal notes (“Bobls”) and Federal bonds (“Bunds”) with maturities of ten  and 30 years. Since 2006, the Federal Government has also been issuing inflation-linked securities with maturities of five and ten  years so far. Securities, all of which are placed by auction as single issues, start off with volumes of at least € 2 billion, although total volumes outstanding in some of the most liquid securities have reached more than € 20 billion. There are currently more than 70 German Government securities in circulation across the entire euro yield curve.

The  principal characteristics of the German Government securities market are fixed maturities, and fixed rates of interest in the case of  Schaetze, Bobls and Bunds. Bubills are issued as  discount papers. All German Government securities  are issued in the form of debt register claims (entered as a collective claim in the Federal Debt Register) without paper certificates.

Other characteristics are their eligibility to serve as insurance reserve for trusts and as ECB-eligible assets. Redemption is in each case at par value, with no provision for premature redemption by the issuer through  call options or drawings. The smallest denomination is € 0.01 and interest is calculated on the basis of the customary methods of actual/365 or actual/366 for capital market securities and actual/360 for money market paper.

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