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 across a number of months, followed by smaller increases 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 almost 4 % an 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 € 66.5 bn inflation linked securities accounted for around 7 % of all German Government securities in circulation at year-end 2017, up from 6 % at year-end 2016.

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.

The ten auctions of inflation-linked securities in 2017 summed up to € 6.5 bn - the same auction pattern and issuance volume as in 2016. A bidding volume of around € 9.9 bn and an allotted volume of around € 5.2 bn result in an average bid-to-cover ratio of 1.9.

From 2018 onwards the auction procedure of inflation-linked Federal securities is going to be adjusted slightly: Two securities can be offered per tender day. As usual, one week before each auction the securities to be reopened will be specified in a press release.
The introduction of these multi-ISIN-auctions for inflation-linked securities improves the opportunity for investors to get access to a wider range of investment alternatives in this special market segment.

In 2018 issuances of inflation-linked securities had the same pattern and volume as in 2017. Only the November auction was cancelled.

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 announcement of the exact security and issuance volume will be published few days before the issuance date.

Inflation-linked German government securities as a proportion of total issuance volume in 2018

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. 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 2017 the outstanding volume grew year by year. The trading volume of indexed securities in 2017 totalled around € 173 bn (based on secondary market statistics from the Bund Issues Auction Group) - just slightly 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 % 7,950 € m 04.09.2018 DE0001030575
2015 (2026) iBund 15.04.2026 0.10 % 14,500 € m 09.10.2018 DE0001030567
2014 (2030) iBund 15.04.2030 0.50 % 12,050 € m 04.09.2018 DE0001030559
2012 (2023) iBund 15.04.2023 0.10 % 16,000 € m 14.10.2014 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)