Treasury discount paper issued by the Federal government are debt securities of the Federal Republic of Germany. They are the Federal securities with the shortest maturities and without fixed interest payments. Their yield results from the difference between the purchase price and the full nominal value at maturity.

Due to their comparatively short maturity of twelve months, Treasury discount paper are used for very short-term investments where the focus is on rapid or immediate availability. For example, larger cash balances can be safely invested in Treasury discount paper. With these discount papers, the investment income is the difference between the nominal value (the redemption rate of 100% at maturity) and the purchase price, which is usually lower by the 'interest'.

Because Treasury discount paper are not traded on the stock exchange but only in direct trading between institutional investors, they are more suitable for investment by professional investors and larger amounts. Interested private investors can buy them through their bank. Although price fluctuations are very low due to their very short maturity, they do occur during the maturity period.

Treasury discount paper are usually issued at (discounted) prices below 100%. This difference (the price gain) from the final redemption price and full face value of 100% is the return or 'interest' on the investment in Treasury discount paper. As a rule, changes in market interest rates have little influence on the price trend. Moreover, they are only relevant if the Treasury discount paper are sold before maturity. The following rule applies:

If the market interest rate rises, the price falls - if the market interest rate falls, the price rises:

Furthermore:

The longer the remaining term, the stronger their price reaction to changes in the market interest rate.

Due to their very short maturity, Treasury discount paper are the least volatile Federal securities and have the lowest price risks.

Even though they are not traded on the stock exchange, they are nevertheless subject to a very low price risk in the context of their over-the-counter trading. Their yield is the difference between the usual lower purchase price and the full nominal value of 100% at maturity.

Issuer risk

The Federal Republic of Germany is liable for the repayment of Treasury discount paper with its assets and tax revenues. Its ability to meet the payment obligations arising from Treasury discount paper determines the issuer risk. This risk is considered to be extremely low. Like all Federal securities, Treasury discount paper are gilt-edged.

Price risk

The prices of Treasury discount paper move in the opposite direction to interest rates on the bond market. In the event of a rise in interest rates, investors may suffer capital losses if they sell  Treasury discount paper before maturity. Compared with the price risk of other Federal securities, theirs is much lower (very low). However, it can be completely eliminated by holding Treasury discount paper until maturity.  

Liquidity risk

The risk of not being able to sell Treasury discount paper at any time before maturity is low, as they are heavily traded among institutional market participants. Additionally, the Deutsche Bundesbank and the Finance Agency maintain the market.

Treasury discount paper are issued on dates published in advance. These issuance dates and the respective planned issuance volumes are published in the form of an issuance calendar at the end of the previous year for the entire following calendar year.

Banks and savings banks

Treasury discount paper can be purchased from almost any credit institution, held in a securities account and sold again if required. In principle, there is neither a minimum nor a maximum investment amount. Credit institutions usually charge fees for the purchase, sale and safekeeping