Foreign Currency Bond
With its current two foreign currency bonds the issuer Bund could achieve cost savings compared to a Euro denominated issue in the same maturity segment and based on prevailing market constellations. Currency risks were excluded by hedges on the international capital markets. The bonds were issued based on German law. The primary issuance was realized by a syndicate of international investment banks. The issues are addressed especially to international investors who are interested in diversification of their Dollar-exposure. They are listed on the Frankfurt exchange.
German USD Bond due September 2012
Characteristics: Redemption at par; interest paid annually; minimum denomination US$ 1,000; original maturity three years; coupon 1.50%; interest calculated on a 30/360 basis; exchange listed; sale, custody and administration: financial institutions.
German USD Bond due June 2010
The German Government’s US dollar bond, due in June 2010, has a coupon of 3.875% and a volume in circulation of US$5 billion. The bond was issued in May 2005 in 144A format and at a spread of +12bp to US Treasuries. Any currency risk was fully eliminated through a cross currency interest rate swap. This enabled a risk-free cost saving over a comparable financing in euro-denominated securities to be achieved. At the same time it supported the broadening and diversification of the investor base for German Government debt. The issuer still has the option to tap this market segment should suitable market conditions re-emerge.
Characteristics: Redemption at par; interest paid annually; minimum denomination US$ 1,000; original maturity five years; interest calculated on a 30/360 basis; exchange listed; sale, custody and administration by financial institutions.
Securitized Loans
Securitized loans are issued in response to demand from credit institutions, insurance companies and other institutional investors if this form of borrowing offers a financing advantage for the Federal Government. However, volumes issued in this way have been modest in recent years, falling sharply from 7.5% of overall borrowing at the start of the millennium to less than 1.25% at the end of 2008.
Others
Individual German Government securities that have been developed for private investors are also available to institutional investors, notably the Day Bond and the Federal Treasury financing paper. Information on these specific instruments can be found at www.bundeswertpapiere.de
