The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

The Bund stops here

Can Germany's Bund become the sovereign benchmark bond in Europe after the introduction of Europe's single currency in 1999? The debt office in Bonn and the Bundesbank have both made urgent reforms, but the government continues to shirk vital decisions. And the lacklustre performance of the government suggests that borrowing targets may be missed. The consequences will be serious both for interest rates and Germany's standing in European capital markets

A phone call to Germany's debt office on Monday, February 10, went unanswered. It's Rosenmontag, at the climax of the German carnival season, and all the staff responsible for borrowing on behalf of the Federal Republic of Germany are in the streets of Bonn enjoying a Rhineland carnival parade. The nation's Dm54 billion ($32 billion) borrowing programme for 1997 is on hold until the next day.

Although few countries borrow as much on the capital markets as Germany does, few spend so little doing it. The public servants responsible for the finance ministry's cost-cutting programme may well be proud that they pay fewer than ten people to work full-time on German national borrowing. (Bankers say there are only three people who make the real decisions.) Yet they seem unaware that Germany might save tens of millions of Deutschmarks every year in borrowing costs were more time and resources spent on better management of Germany's sovereign debt.

Take Bonn's recent decision to allow stripping of interest coupons from the principal of German sovereign issues (Bunds). Sources at the Bundesbank, its fiscal agent, say they spent two years trying to persuade the finance ministry to permit this innovation.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?