Federal bonds ("Bunds")

Profile

Maturity: 7, 10, 15 or 30 years

Income: fixed annual interest payment

Redemption: at par value

Price risk: medium (7- to 15-year) to high (30-year)

Issuer risk: very low

7 to 30-year Bunds represent the long end of the German Government yield curve. At year-end 2019, they account for about 67 % of the Federal Government’s debt portfolio, with 10-year bonds alone accounting for around 46 %. They represent therefore the most important source of funding for the Federal Government.

10-year and 30-year Bunds as a proportion of currently tradeable Government debt

Primary market

In 2020 ten-year Bunds will comprise about 14 % (after 22 % in 2019) and thirty-year Bunds around 3 % (after 7 % in 2019) of the annual auction volume. The newly added 15-year Federal bonds will also account for about 3 % and the seven-year Federal bonds for about 6 % of the annual auction volume (without inflation-linked securities)

In January and June 2020, there will be two new 10-year Bunds. They will mature on 15 February and 15 August 2030. After initial issuances of € 5 bn they will be reopened five and seven times with volumes between € 2 and 5 bn until they reach a total outstanding volume of at least € 25 bn, each.
In comparison to the previous year the 10-year Bunds’ auction volume will increase by € 8 bn to € 52 bn. This is € 5 bn above the original annual preview. Specifically, this growth stems from three monthly reopenings of the 10-year Federal bond issued in February. The respective reopenings were conducted in the second quarter and have been increased from € 3 bn to € 4 bn, each. Additionally there were increases of €1 bn, each, in the auction volumes of the first and third reopenings of the 10-year Federal bond issued in June.

From January till November 2020 the 30-year Bunds which were issued first in 2012, 2017 and 2019 will have monthly reopenings of € 1 or 1.5 bn. Thereof the 30-year Bund (maturing in July 2044) will be reopened just once in April, the 30-year Bund (maturing in August 2048) will be reopened four times in February, June, August and October. The 30-year Bund (maturing in August 2050) will be reopened six times: in January, March, May, July, September and November. At year-end these three bonds will reach outstanding volumes of € 28.5 bn, € 26.5 bn as well as at least € 16.5 bn, respectively. For the Bund maturing 2050 the issuance in June was carried out within the framework of a syndicate with a volume of € 6 bn. In the third quarter, one increase of € 1.5 bn, each, is planned for the Federal bond maturing in 2050 and two increases for the Federal bond maturing in 2048.
All these issuances will amount to a total annual volume of € 19 bn for 2020 in the 30-year range (incl. syndicate), an increase of € 6 bn compared with the previous year and the original annual preview.

Transaction Review Bund 2019 (2050)

Press Release Bund 2019 (2050)

In the second quarter of 2020, a 7-year and a 15-year Federal bond were issued for the first time. In May, the 7-year Federal bond maturing in November 2027 with a volume of € 4 bn had its first issuance. Two reopenings of € 3 bn each will follow in June, three more increases of € 4 b, each, are planned for the third quarter.
Also in May, the 15-year Federal bond maturing in May 2035 ha a new issuance of € 7.5 bn within the framework of a syndicate. After an € 2.5 bn reopening in June further regular reopenings of € 3.5 bn, each, will follow in the third quarter.

Transaction Review Bund 2020 (2035)

Press Release Bund 2020 (2035)

Due to two substantial increases in the Federal Government's own holdings on 1 and 16 April 2020, this year's auction and issuance volume of Federal bonds will diverge by a total of € 42 bn euros. (The issuance volumes of the syndications will further add to this divergence.)

• The increase on 1 April was evenly distributed among 21 already issued Bunds ("off-the-runs"), adding € 2 bn to each security's issuance volume.
  A list of all bonds concerned can be found in the press release of 23 March on the issuance calendar for the second quarter of 2020.

• The volume of the increase on 16 April was evenly distributed among 32 already issued Bunds ("off-the-runs"). For each security an issuance volume of € 2.5 bn was added.
  A list of all German Government securities concerned can be found in the press release of 7 April on the updated issuance calendar for the second quarter of 2020.

Bunds as a proportion of total issuance volume in 2020

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. So in this chart their share increases during the year with each new issuance of an inflation-linked bond whereby the shares of the nominal bonds decrease slightly. Also included in this annual chart are the one-off reopenings to the Federal Government's own holdings of 21 off-the-run Federal bonds of € 2 bn, each, on 1 April and again of 32 off-the-run Federal bonds, 7 Federal notes and 1 Federal Treasury note of 2.5 bn, each, on 16 April, which increases the issuance volume but not the auction volume.

Secondary market

Both in the primary and secondary markets, Bunds are one of the most important sources of funding for the Federal Government. They account for more than 25 % of 2020's auction volume and for more than half of trading volume.

Since years there are more than 35 Bunds in circulation, accounting for up roughly half of the outstanding German Government securities in the secondary market. About a third thereof reaches a volume in circulation of at least € 20 bn. At year-end 2019, the total volume outstanding arrived at a figure of € 757.5 bn.
According to Finance Agency data, in the secondary market for German Government securities 10-year Federal bonds accounted for a total share of over 50 % of trading volume of reporting member banks of the Bund Issues Auction Group. In 2019 they represented 55 % or € 2,230 bn. Trading volume of 30-year Federal bonds reached € 339 bn or 8 %. Since many years 10-year Bunds are the flagship product at the secondary level of the German Government bond market.

Stripping

Bunds can be stripped at the institution with which the securities are held in custody and their principals and coupons traded separately.

Additional investment opportunities have been available since the introduction of “Stripping” of 10- and 30-year Federal bonds in 1997. In case of a nominal interest rate higher than zero the principle and the interest coupons of these issues can be traded separately (from € 50,000; minimum denomination € 0.01). The separation of interest and principle is undertaken on behalf of the bond holder by the body carrying the safe custody account in question. It is also possible to reconstruct the original bond from the coupon strip and principal strip; however, only financial institutions may do this with their own bond holdings. Coupon strips with the same maturity are combined and traded under one single ISIN (security identification number). Strips from different types of bonds cannot be combined.

Since on September 13th, 2012, the Amendment to the German Federal Debt Administration Act (“Gesetz zur Änderung des Bundesschuldenwesengesetzes”) came into force and enabled the inclusion of collective action clauses (CACs) into the terms of newly issued German Government securities, already existing strips (not including CACs) and future strips (including CACs) are not fungible. So the Federal Government decided to establish new stripping dates. Since January 1st, 2013 new issuance terms and conditions came into effect: Federal bonds imply new standardised maturity dates on February 15th, May 15th and/or August 15th. (The former stripping dates were January 4th, July 4th and September 4th.)

Currently tradeable 7-, 10-, 15- and 30-year Federal bonds

The terms of issue for Federal bonds are available within the security master data after clicking on the corresponding ISIN.