Inflation-linked securities

Profile

Maturity: 5-year (inflation-linked Bobl) or at least 10- or 30-year (inflation-linked Bund)

Income: fixed annual interest payment + inflation compensation

Redemption: at least par value + inflation compensation

Price risk: medium, from 10-year maturity high

Issuer risk: very low

Since the Federal Government’s entry into this market segment in 2006, the investor base, financing flexibility and spectrum of securities offered has been continually expanded. Based on the previous success achieved in the form of significant interest cost savings, one of the Federal Government's strategic goals is to build up an entire German Government security real yield curve. Unlike the somewhat short and volume-heavy issuance tendencies for nominal bonds, inflation-linked bonds are initially placed in smaller volumes, followed by smaller increases across a number of months until each security reaches the benchmark figure of about € 15 bn.

Inflation-linked German Government securities are now an established part of the Federal Government's financing strategy. Their share of total annual issuance volumes amounts to around 4 % on average since 2006.

There are currently five inflation-linked German Government securities in circulation: four 10-year bonds and one 30-year bond.

When the inflation-linked 5-year Bobl, issued in 2011, matured on 15 April 2018 the total outstanding volume of inflation-linked securities fell by € 15 bn. Now the 2009 issued inflation-linked bond maturing in 2020 constitutes the first point on the German Government real yield curve. The last point is represented by the 2015 issued inflation-linked bond maturing in 2046.

Currently the five current tradable securities have a total volume of € 71.2 bn. Since 2014 inflation-linked securities account for between 6 an 7 % of all German Government securities in circulation.

Inflation-linked Securities as a proportion of currently tradeable Government debt

Primary market

The liquidity of index-linked securities is also increasing in parallel to the volume in circulation. The auctions generally take place on a monthly basis, with the exception of August and December.

2018 the issuance volume of inflation-linked securities summed up to € 6.5 bn for the third consecutive year. But in contrast to the previous year it was issued in nine instead of ten auctions. Additionally, five of these auctions were multi-ISIN auctions where two inflation-linked securities were offered within one tender. A bidding volume of around € 9.2 bn and an allotted volume of around € 5.2 bn result in an average bid-to-cover ratio of 1.8.

For 2019 there are ten auction planned  and again an issuance volume within the range of € 6 to 10 bn. There will be reopenings of the existing inflation-linked bonds with maturities in April 2026, 2030 and 2046 instead of new issues. Thereby the 2018 established multi-ISIN-auction procedure of inflation-linked Federal securities will be continued and offered in selected auctions. As usual, one week before the auction date the security (or in the case of an multi-ISIN-auction: securities) to be reopened will be specified in a press release by Deutsche Bundesbank.

In general, the issues in the inflation-linked securities segment are an integral part of the Federal Government's strategic issuance planning. They should continue to take place on a monthly basis, with the exception of August and December. As a rule, they take place on the first or second Tuesday of each month. The exact auction days are published already in the issuance outlook for the full calendar year.

Inflation-linked German government securities as a proportion of total issuance volume in 2019

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).

Secondary market

The liquidity of inflation-linked securities has increased continually since they were first issued. Besides years with maturities in 2013, 2016 and 2018 the outstanding volume grew year by year. The trading volume of indexed securities in 2018 totalled around € 135 bn (based on secondary market statistics from the Bund Issues Auction Group) - € 38 bn below previous year's level.
Thanks to the total volume of inflation-linked securities currently outstanding, the issuer can draw on a comfortably deep market, providing it with sufficient flexibility to support secondary market activities.

Currently tradeable inflation-linked Federal bonds and notes

Bond Maturity Coupon Outstanding last Auction ISIN
No security was found.
2015 (2046) iBund 15.04.2046 0.10 % 8,350 € m 07.05.2019 DE0001030575
2015 (2026) iBund 15.04.2026 0.10 % 16,300 € m 07.05.2019 DE0001030567
2014 (2030) iBund 15.04.2030 0.50 % 14,050 € m 09.07.2019 DE0001030559
2012 (2023) iBund 15.04.2023 0.10 % 16,500 € m 09.07.2019 DE0001030542
2009 (2020) iBund 15.04.2020 1.75 % 16,000 € m 10.02.2015 DE0001030526

The terms of issue for inflation-linked Federal securities are available within the security master data after clicking on the corresponding ISIN.

Indexation coefficients of inflation-linked Federal bonds and notes

Daily reference index & indexation coefficients base year 2015 (XLS)Daily reference index & indexation coefficients base year 2005 (XLS)