Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Top Stories

Germany adds 54 billion euros to bonds to use for repo, energy spending

Published : , on

(Refiles to fix table, with no changes to text)

By Yoruk Bahceli

(Reuters) -Germany’s finance agency said on Wednesday it had increased the size of the outstanding bonds on its own account to lend to investors in return for cash, helping cover financing needs arising from the energy crisis.

The finance agency, which manages Germany’s debt, will increase the size of 18 bonds by 3 billion euros each, totalling 54 billion euros ($53.00 billion), on its own books to use in the market for repurchase agreements, or repos, where it lends bonds to investors in return for cash.

That will give the German government flexibility to cover financing needs arising from the energy crisis, the agency said.

The decision mirrors its strategy at the height of the COVID pandemic in 2020 which saw the agency increase holdings of its own bonds by 42 billion euros in the face of unexpected funding needs.

This latest increase was for bonds that the agency said were in high demand.

German government bonds are a key market collateral for investors in the euro zone, and have been short in supply after years of European Central Bank bond purchases. That shortage makes it hard for investors to borrow them in the repo market.

The finance agency usually retains a small amount of the bonds it sells in regular issuance on its own books, using them for repo transactions and lending them to investors in return for cash.

It can increase such operations to ensure markets function smoothly and did so earlier this year, when it upsized a bond in the aftermath of Ukraine’s invasion to use in the repo market.

“It is obvious that the true reason is the impaired liquidity in Bunds; the latest auctions speak for themselves,” said Michael Leister, head of interest rate strategy as Commerzbank, referring to recent German debt sales that have seen historically weak demand.

LIMITED IMPACT?

Analysts have also been concerned about a scarcity of collateral causing dysfunction in already volatile markets around year-end, when portfolio managers bulk up on collateral to reduce risk over the holiday period, when liquidity is thin.

“It will definitely lower some concerns about year-end,” said Lyn Graham-Taylor, senior rates strategist at Rabobank, calling the decision a “chunky-sized operation”.

The German two-year swap spread, which measures the difference between the bond yield and the fixed leg of a two-year interest rate swap that investors pay to hedge against rising rates in exchange for floating-rate payments, narrowed by 6 basis points (bps) to 91 bps, the smallest gap since early September. <EURAB6E2Y=>

But it is still up around 60 bps this year, highlighting the shortage of available collateral. It recently touched its widest since the euro zone debt crisis.

“This reaction is rather tame considering the moves we had in recent months,” Leister at Commerzbank said.

Analysts said support to the repo market from Germany’s decision would likely be temporary.

With the European Central Bank deciding to renumerate government deposits at euro zone central banks only until April 30, debt offices are likely to have an incentive to cut larger cash balances, making them less likely to lend bonds to investors in the repo market in the future.

Details of the bonds increased in size are as follows (in billions of euros):

Security Coupon ISIN Maturity Volume New volume

Federal 0 DE0001104867 15-Dec-23 3.0 18

Treasury note

Federal bond 0.5 DE0001102374 15 Feb 25 3.0 30.5

Federal note 0 DE0001141810 11 Apr 25 3.0 23

181

Federal bond 1 DE000110238 15 Aug 25 3.0 30.5

2

Federal bond 0.5 DE0001102390 15-Feb-26 3 33.5

Federal note 0 DE000114183 10-Apr-26 3 28

183 6

Federal bond 0 DE0001102408 15-Apr-26 3 32.5

Federal bond 0.5 DE0001102424 15-Aug-27 3 32.5

Federal bond 0.5 DE0001102440 15-Feb-28 3 28.5

Federal bond 0.25 DE0001102457 15-Aug-28 3 28.5

Federal bond 0 DE0001102556 15-Nov-28 3 27

Federal bond 0.25 DE0001102465 15-Feb-29 3 29.5

Federal bond 0 DE0001102473 15-Aug-29 3 29.5

Federal bond 0 DE0001102499 15-Feb-30 3 28

Federal bond 0 DE0001102531 15-Feb-31 3 28

Federal bond 0 DE0001102580 15-Feb-32 3 31

Federal bond 1.25 DE0001102432 15-Aug-48 3 34.5

Federal bond 0 DE0001102572 15-Aug-52 3 19

Total 54.0

($1 = 1.0190 euros)

(Reporting by Yoruk Bahceli; Editing by Amanda Cooper)

Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post