Inflation-linked Federal securities (ILB)
are currently an established part of the Federal government's financing strategy. Their annual share of the auction volume has averaged approx. 3 % since 2006.
Due to the positive diversification effects and the interest cost savings realised over the past years, the Federal government has successively established a yield curve of real nominal Federal securities.
Compared to the nominal securities, the inflation-linked Federal securities are issued in smaller volumes at the time of the initial issuance and further reopenings. The reopenings are spread over several years until each security reaches the benchmark size of at least € 15 bn.
Reference Index & Indexation Coefficients
The inflation indexation for both nominal value and coupon payments is based on the unrevised Harmonised Index of Consumer Prices (HICP) of the euro area (total index excluding tobacco). This is calculated monthly by the Statistical Office of the European Union ("Eurostat") and published on its website.
The indexation coefficients are computed with a time delay by linear interpolation of the montly values of the reference index.
Inflation-linked Federal securities
are generally available with original
maturities ranging from around five years (notes) to around 30 years (bonds).
Their redemption and annual interest payments are linked to the development
of the harmonised consumer price
index (HICP) of the eurozone, excluding tobacco.
Issuances in the segment of inflation-linked Federal securities are generally an established part of the Federal government's strategic issuance planning. The exact auction days are already published with the issue planning for the entire year. Ten auctions of inflation-linked Federal securities are held each year - generally on the first or second Tuesday of each month, with the exception of August and December.
In some cases, the issuances are conducted as multi-ISIN auctions, in which bids can be submitted for two securities at the same time. The security intended for reopening on the issuance day, or the securities intended for reopening in the case of a multi-ISIN auction, will be named on the Thursday before the tender date in the announcement of the tender procedure by press release of the Deutsche Bundesbank.
The annual issue volume in this segment in 2022 was € 6.25 bn, corresponding to around 1 % of the annual issuance volume of all Federal securities. An issuance volume of € 6 to 8 bn is again planned for 2023.
For inflation-linked Federal securities, only the issuance dates are published in the annual issuance calendar. The ISIN issued in each case is announced only a few bank working days before the issuance dates.
Bid/Cover Ratio: Ratio of offered and allocated volume
The trading volume of inflation-linked Federal securities amounted to around € 163 bn in 2021 (based on secondary market data surveys of reporting auction group banks and institutions in the Bund Issues Auction Group), 31% above the previous year's level of € 114 bn. In both years, this corresponded to a share in the total trading volume of all Federal securities of around 3 %.
With the currently total volume outstanding of inflation-linked Federal securities, there is a comfortable market depth that provides the issuer with sufficient flexibility to support secondary market activities.
The liquidity of inflation-linked Federal securities has increased continuously since they were first issued. The total volume outstanding has always been above € 50 bn since 2013. Currently there are five inflation-linked Federal securities outstanding: four bonds with original maturities of around 10 years as well as a 30-year bond. In total, they reached a volume of around € 77 bn or 5 % of the volume of all outstanding Federal securities at year-end 2022.
Current Share of inflation-linked Federal Securities in the Volume of all Outstanding Federal Securities
Current Outstanding of Inflation-linked Federal Securities
|Total volume||78,150 € mn|
|2021 (2033) Bund/€i||15.04.2033||0.10%||7,500 € mn||10.01.2023||DE0001030583|
|2015 (2046) Bund/€i||15.04.2046||0.10%||13,300 € mn||03.01.2023||DE0001030575|
|2015 (2026) Bund/€i||15.04.2026||0.10%||18,700 € mn||06.09.2022||DE0001030567|
|2014 (2030) Bund/€i||15.04.2030||0.50%||22,150 € mn||05.04.2022||DE0001030559|
|2012 (2023) Bund/€i||15.04.2023||0.10%||16,500 € mn||09.07.2019||DE0001030542|