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 2/2016 vs. 1/2017

€ bn 2/2016 1/2017
(Gross) trading volume 2,135 2,584
Net trading volume 83.7 82.2

In the first half-year 2017 there was the highest gross trading volume since two years. In comparison with the second half-year 2016 the gross trading volume increased by nearly 21 %. However, the trading volume was evenly spread between the two quarters of the first half-year 2017.

Net trading summed up to € 82 bn in the first half-year 2017 - after almost € 84 bn in the second and € 63 bn in the first half-year 2016. 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 2017

Trading volume - Funding tools

Broken down by instruments in particular the trading volume of short and medium term Government securities rose in the first half-year 2017. The share of Federal notes (Bobl) of total gross trading across all Government securities increased 2 percentage points. The share of Federal Treasury notes (Schatz) and 10-year Federal bonds (Bund10) inched up only about half a percentage point. Inflation-linked Federal securities(ILB) contributed to the total trading volume at the same relative level as in the previous half-year.

The relative trading volume with 30-year Federal bonds (Bund 30) fell more than 2 percentage point. Treasury discount paper (Bubill) lost more than 1 percentage points. In absolute terms the trading volume of Bubills amounted to almost € 32 bn - 40 % less than in the previous quarter and the lowest level since this statistics began. This stems from the almost continuous reduction of issuance volume over the last eight years with just one excemption in 2016. Accordingly Bubill's share of total trading volume of Government securities fell from more than 8 % (above-average because of the financial crisis) in 2009 to 3 % in 2014 and now to 1 %.

Gross trading (in € bn) 2/2016 1/2017
Bobl 340 466
Bubill 52 32
Bund10 1,199 1,465
Bund30 214 200
ILB 77 101
Schatz 253 321

Net trading volume - Funding tools

Similarly to the gross trading statistics the net trading figures of the Treasury discount paper (Bubill) for the first half-year 2017 marked a historical low of € 3.5 bn, after € bn 10.5 in the preceding half-year. There was a decline by around 40 % in net trading volume with Federal notes (Bobl). Additionally, the net trading volume of inflation-linked Federal bonds (ILB) dropped by 23 %, the net volume of 30-year Federal bonds (Bund30) by more than 20 %. On balance the net trading with Federal Treasury notes (Schatz) decreased by 9 %.

Almost two doublings in a row appeared in net trading volume with 10-year Federal bonds (Bund 10): Starting from € 12 bn in the first half-year 2016 to € 23.2 bn in the second and (just + 75 %) to € 40.6 bn this half-year. That marks the highest point since data collection. 

Net trading (in € bn) 2/2016 1/2017
Bobl 20.6 12.2
Bubill 10.5 3.5
Bund10 23.2 40.6
Bund30 4.7 3.8
ILB 2.4 1.9
Schatz 22.3 20.3

Regions 1st half-year 2017

Trading volume - Regions

The geographical analysis reveals higher gross trading figures for all regions. The net trading volume with counterparts from America reached its highest highest point since beginning of the statistics. It rose by over 40 % to € 378 bn or a share of more than 2 percent of total trading volume across all regions. Starting from the low level during the last years the gross trading volume with Africa quadrupled to more than € 4 bn - the highest level since the second half-year 2011. Trading activity with Arabian countries also soared from € 4 bn to more than € 10 bn. On a relative basis as a share of total trading across all regions these gains aren't significant enough to get visible. Also the slight decrease in Asian trading wasn't significant enough to reach at least 1 percentage point during first half-year 2017.

In contrast the trading volume with Europeans from outside the euro area decreased slightly by almost 1 percentage point (from 56 %). These trading activities are mainly dominated by British financial institutions which are still by far the most important trading partners. Almost a quarter of volume was traded with counterparts from Eurozone. Despite an increase in absolute terms to € 606 bn, their share declined by 1.5 percentage points .

Gross trading (in € bn) 2/2016 1/2017
Africa 1 4
America 264 378
Arabian countries 6 10
Asia 150 174
Euro area 532 606
Other Europe 1,183 1,412

Net trading volume - Regions

For the first time in 3 years the regions Asia, Eurozone and other Europe are almost level pegging regarding net buying of German Government securities. In the first half-year 2015 Asia fell out of the trio of 'traditional' potent buyers. One year later Asia marked the highest net selling volumes ever recorded from a region of around € -48 bn. Meantime counterparts from Europe (without Eurozone) exercised the highest net purchases ever from a single region.
While the degree of net purchases from Europe without Eurozone remained almost unchanged the net buyings from the Eurozone halved during first half-year 2017.
For the Arabian countries the first net sales of Government securities of € -1.2 bn were recorded in this half-year. Already since the second half-year 2015 the Arabian countries didn't become visible as significant net buyers. On the opposite the net trading volume of € 2 bn with America turned positive for the first time since the second half-year 2014.

Net trading (in € bn) 2/2016 1/2017
Africa -0.1 -0.0
America -4.8 2.0
Arabian countries 0.2 -1.2
Asia -1.3 24.2
Euro area 62.9 31.1
Other Europe 26.8 26.1

Institutions 1st half-year 2017

Trading volume - Institutions

The most significant change in comparison to the second half-year 2016 was the increase of 40 % of gross trading volume with asset managers. By outstripping a volume of € 704 bn a new record was set. The share of trading volume across all counterparts soared more than 3.5 percentage points to 27 %. Also trading with hedge funds reached a record volume of € 209 bn in the first half-year 2017. That represents an unchanged share of 8 %. After their weakest half-year since the start of data collection banks traded a volume of € 533 bn. Their share of total volume remained at 21 percent.
Other counterparts, that for instance include retail clients as well as commercial and industrial companies, traded the lowest volumes since data collection of less than € 30 bn. Their share of overall trading volume inched down almost 0.5 percentage points to 1 %. Central banks share of trading volume declined more than 2 percentage points to 12 % although their volume in absolute numbers increased slightly by about € 5 bn.

Still the most important counterparts remain the brokers. That category contains especially trading via electronic trading platforms. Their share of gross trading volume amounted to almost € 754 bn or 29 % of total volume. Although there was an increase of trading volume by 16 %, that means a minus of more than 1 percentage point for brokers compared to the second half-year 2016.

Gross trading (in € bn) 2/2016 1/2017
Asset manager 506 704
Banks 434 533
Broker 651 754
Hedge funds 172 209
Pension funds 22 28
Other 32 29
Insurances 19 22
Central banks 300 305

Net trading volume - Institutions

A view to the first half-year 2017 shows a significant stockpiling of Government bonds at central banks of more than € 80 bn. That's the highest amount since the first half-year 2013. Besides some exceptions central banks represent the strongest net buyers since the beginning of data collection. With a considerably lower trading volume of just one tenth banks follow. Compared with the second half-year 2016 they reduced the net purchases by about 50 %. Other counterparts and asset managers follow with volumes of € 3.1 bn and € 1.5 bn respectively.
Both banks and asset managers are traditionally among the strongest demanding counterparts besides central banks. However, since the beginning of the Public Sector Purchase Programme of the ECB in the first half-year of 2015 especially the asset managers became less and less present as net buyers. During the last three half-years they even became net sellers of of Government bonds.
Hedge funds and pension funds were on balance sellers in the first half-year 2017 with net volumes of € -1.0 bn and € -1.6 bn respectively.

Net trading (in € bn) 2/2016 1/2017
Asset manager -2.2 1.5
Banks 15.9 7.6
Broker 1.1 -8.2
Hedge funds -3.7 -1.0
Pension funds -1.2 -1.6
Other 4.4 3.2
Insurances 0.7 0.7
Central banks 68.8 80.2