Secondary market structures

Secondary market data continuously transmitted through a representative part of the members of the Bund Issues Auction Group provide the Finance Agency and the participating financial institutions with an indicative overview of the secondary market for German Government securities.

The reported turnover in German Government securities provides an insight into the structure of the secondary market.

A representative share of the reporting member banks report their transactions in German Government securities on a voluntary basis – broken down by the type of security traded (Bubills, Schaetze, Bobls, Bunds and inflation-linked securities), region and the type of institution of the involved counterparty. The approximate structures of the secondary market can be identified on the basis of these trading volumes and net positions.

The gross trading volume is derived by adding up the reported sales and purchase volumes of the member banks. The net trading volume is the balance of sales minus purchase volumes.

The net positions show the trading position of the member banks after sales and purchases within one category have been balanced. Accordingly, for example a net position of € -22 bn vis-à-vis brokers corresponds to a € 22 bn higher volume of purchases by member banks from brokers than sales to brokers. These trading data are provisional since later submissions might lead to subsequent corrections.

Semiannual comparison of trading volumes 1/2018 vs. 1/2019

€ bn 1/2018 1/2019
(Gross) trading volume 2,624 2,256
Net trading volume 55.3 51.0

With a gross trading volume totaling € 2,256 bn in the first half 2019, the slightly positive stabilization trend of the past two years could not be continued. The volume was 9 % higher than in the second half of 2018, but 14 % lower than in the traditionally stronger trading 1st half-year of 2018 .

Net trading summed up to around € 51 bn in the first half of 2019. That's € 3 bn less than in the previous half-year 2/2018 and € 4 bn less than in the first half-year 2018. Generally the net trading volumes are predominantly determined by the issuance volumes of the Federal Government securities during the corresponding time period.

Funding tools 1st half-year 2019

Trading volume - Funding tools

Broken down by instruments, the clearest percentage increase occured in trading of Treasury discount paper (Bubill): Compared to the first half of 2018 it surged 56 % or around € 21 bn respectively. Since the lowest trading volume in Bubills to date has been measured in the first half of 2017 , the issuance volume and concurrently the trading volume have almost doubled.

By contrast, declining sales were recorded in all other Federal securities - most notably in the 30-year Federal Government bonds (Bund30). Here, in the first half of 2019 about a third or around € 80 bn less was traded, compared to the first half of 2018. Ten-year Federal Government bonds (Bund10) have by far always been the most heavily traded among all Federal securities. A 15 % or € 221 bn lower trading volume (by comparing the first half-years) could only marginally reduce their dominance. Trading in Federal notes (Bobl) inched down just 2 %, trading in inflation-linked Federal securities (ILB) and Federal Treasury notes (Schatz) decreased around 20 %, each.

Gross trading (in € bn) 1/2018 1/2019
Bobl 425 417
Bubill 37 58
Bund10 1,506 1,286
Bund30 251 170
ILB 82 67
Schatz 324 258

Net trading volume - Funding tools

By comparing the first half-years 2018/2019, there were almost 50 % higher net purchases in the Federal notes (Bobl). Around 16 % more Treasury discount paper (Bubill) were bought on balance.

The strongest decline in net purchases (57 %) was seen in inflation-linked Federal securities (ILB). The net purchases of the Federal Treasury notes (Schatz) fell by almost 38 % and those of 10-year Federal bonds (Bund10) by around 22 %. 30-year Federal bonds (Bund30) were bought at an almost unchanged level.

Net trading (in € bn) 1/2018 1/2019
Bobl 13.7 13.3
Bubill 5.8 12.4
Bund10 8.2 9.0
Bund30 6.4 6.2
ILB 1.5 2.0
Schatz 12.3 8.2

Regions 1st half-year 2019

Trading volume - Regions

The geographic distribution of trading volume of Federal securities is traditionally dominated by trading partners from the rest of Europe (Europe excluding the euro area). In the past half-year, they were trading 19 % or € 282 bn less than in the first half of 2018. In the euro area volumes averaged to just half, in Asia and America to less than a quarter of other Europe's amount in recent years. Thereby since 2013, trading volumes with American counterparties have always surpassed those of Asian.
In contrast, trading with Arab countries which recorded the highest percentage losses in the first half of 2019 at -59 % or € -10 bn respectively, and trading with Africa which doubled trading by around € 0.5 bn, are hardly significant due to their very low level.

Gross trading (in € bn) 1/2018 1/2019
Africa 0 1
America 410 320
Arabian countries 17 7
Asia 157 146
Euro area 544 568
Other Europe 1,495 1,214

Net trading volume - Regions

American counterparties bought Federal securities on balance at record levels and with the highest growth rate of 157 % among all regions. So after the first half of 2018 America was again the second most important purchasing region. 17 % more than a year ago was sold to the rest of Europe.
By contrast, net purchases of Asian counterparts returned negative (to net sales) for the first time since the second half of 2016, at -114 %. However, net purchases declined most clearly in the euro area itself (-218 %), where they turned to significant net sales of counterparts for the first time after the second half of 2012.

Net trading (in € bn) 1/2018 1/2019
Africa 0.1 0.0
America 11.9 30.7
Arabian countries -8.3 -1.9
Asia 7.8 -1.1
Euro area 11.8 -14.0
Other Europe 32.0 37.3

Institutions 1st half-year 2019

Trading volume - Institutions

The analysis of trading institutions reveals: the brokers are leading the way. In addition to genuine brokers, this group primarily includes electronic trading platforms on which the actual trading partner can't be identified. Together with the also weighty asset managers and banks, brokers conducted around 80 % of trading in Federal securities for years. The fourth most important counterparty are the central banks that, however, since 2015 have increasingly lost share of trading to hedge funds . After trading with asset managers reached a historic high of around € 750 bn in the first half of 2018, it fell by 18 % a year later. Banks, like hedge funds, traded 15 % less, central banks 14 % and brokers 10 % less. As in the regional analysis, the largest percentage changes took place among the contractors with the lowest turnovers. Comparing the first half-years of 2018 and 2019, insurers' trading volume declined by 30 % or € 7 bn while pension fund's trading increased by 10 % or € 2 bn, respectively.

Gross trading (in € bn) 1/2018 1/2019
Asset manager 746 614
Banks 579 491
Broker 776 696
Hedge funds 207 177
Pension funds 23 26
Other 21 23
Insurances 24 17
Central banks 248 213

Net trading volume - Institutions

The dominance of asset managers, banks and central banks, already known from the gross trade analysis, also existed for net trading volume for most of the time until the start of ECB's purchase program. In the second half of 2015 asset managers stopped completely buying German Government securities before they returned to earlier levels in the first half of 2018. At the same time the banks became net sellers. In 2018, hedge funds emerged as major net buyers, too. Together with asset managers (unchanged from the first half of 2018) and central banks (+84 %) they reached almost the same level of net purchases of around € 20 bn in the first half of 2019. Although hedge funds remained 42 % below their record half-year 1/2018. The much higher net purchases of hedge funds since 2018 coincide not accidentally with higher demand from America because most of them are domiciled in America. Banks, pension funds, insurance companies and others traded on balance less than € 1 bn in the first half of 2019, each.

Net trading (in € bn) 1/2018 1/2019
Asset manager 19.8 20.1
Banks -7.3 0.9
Broker -6.0 -12.2
Hedge funds 36.1 20.8
Pension funds 2.3 0.6
Other 0.1 0.0
Insurances -1.3 -0.2
Central banks 11.5 21.1