Billions for defense, billions for infrastructure. The German state invests a lot of money. Where does it come from and how is it organized?
Bundes government billions of billions. Germany will accept more debts for this. A hardly known Federal Agency is responsible for the implementation – Finanzagentur GmbH, based in Frankfurt am Main. It will have significantly more to do in the coming years – thanks to the federal billion -out package.
Only institutional investors can offer the finance agency for government bonds – and at least one million euros, explains Arthur Brunner, course broker at ICF Bank: “Basically, every credit institution or any company can apply to the Federal Finance Agency. However, these must be based in the EU or the European Economic Area. So in the EU countries or Liechtenstein, Iceland, Norway or Switzerland.”
Government bonds for private individuals
Since 2013 it has no longer been possible for private individuals to buy government bonds directly from the finance agency. Furthermore, private investors can buy and sell government bonds on the stock exchanges.
Federal bonds are awarded weekly after supply and demand. The finance agency naturally hopes for the lowest possible interest costs for the federal government.
So find bidders and buyers together
The institutional bidders want the highest possible interest on their bonds. It is agreed in an auction procedure to the exclusion of the public Brunner: “It runs standardized through an electronic bidding system. The system is managed by the Deutsche Bundesbank. The members of the group can hand over their bids there, that is, they enter their commandments in the system. The financial agency then divides the corresponding bonds on the bids promptly.”
A computer automatically selects different scenarios from the bouquet on offer, with different options such as bonds can be optimally distributed. Which computer -generated scenerio is implemented – i.e. who receives how many bonds to what interest rate – then decides an expert commission of the finance agency, in close coordination with the Bundesbank and the Federal Ministry of Finance.
Who is investing in German government bonds?
The federal bonds on the capital market are still very popular worldwide, says the managing director of the Federal Finance Agency Tammo Diemer: “The majority of the papers are actually located in other European countries, as well as in further countries, especially in Asia.”
Typical buyers of securities are those who are interested in liquidity. “In this respect, it is the central banks, it is the state funds that play an important role in the international environment, as well as the pension funds.”
Could the federal government go out?
According to Diemer, it is not conceivable that the lender will ever go out – even with increasing government spending. For the managing director, it has already been advised that the increased funds naturally also have increased interest expenses, simply because the amounts are higher. And the interest we affect corresponds to the yields traded on the market.
After the new federal debt plans were announced, interest rates for government bonds increased significantly. From 2.4 percent in February to temporarily three percent. They have currently leveled off at 2.5 percent for a term of ten years.
For many years, the interest rates for the federal government were extremely low thanks to central bank interventions. At the end of 2019 to 2022, the interest was even negative. Investors were ready to forego comparatively secure investment on interest. Due to the uncertain US customs policy, more capital flows into European and German government bonds.
