The German government is making billions in debt thanks to negative rates – News Couple

The German government is making billions in debt thanks to negative rates

By Renee Wagner

BERLIN (Reuters) – The German government has reaped billions of euros from issuing bonds this year thanks to negative interest rates on its securities, according to a letter seen by Reuters from Minister of State for the Finance Ministry Florian Tonkar to a left-wing lawmaker. .

When the federal securities were issued to finance the budget and private funds, “payments amounting to about 5.855 billion euros were collected,” according to Tunkar’s letter in response to a question from Christian Guerke, of the far-left Lenke party.

To counter the fallout from the coronavirus pandemic, the federal government has borrowed 483 billion euros ($544.44 billion) from financial markets this year, up about a fifth from 2020, when the issuance reached its previous record.

Tonkar wrote that the average yield on federal government securities issued this year was minus 0.56%. However, the auctions were oversubscribed 1.7 times.

“Despite negative yields, German bonds are selling like hot cakes,” said Görke, opposition MP Linke in the German parliament’s lower house. The federal government could have sold more bonds without any problem.

Next year, the German Finance Agency, the government debt management arm, plans to issue 410 billion euros of bonds.

German government bonds, which are rated “AAA” by all major rating agencies, are in high demand by investors as the repayment is considered very secure.

The stock market is also large, and large purchases by the European Central Bank increase demand, which in turn lowers returns.

(1 dollar = 0.8872 euros)

(Writing by Paul Carell, Editing by Madeline Chambers)

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