German government is taking billions into debt thanks to negative interest rates

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BERLIN – The German government has pulled billions of euros in debt issuance this year thanks to negative interest rates on its securities, according to a letter, seen by Reuters, from Secretary of State at the Ministry of Finance Florian Toncar to a left-wing legislator.

When federal securities were issued to finance the budget and special funds, “payments amounting to around 5.855 billion euros were collected,” according to Toncar’s letter in response to a question from Christian Goerke, of the extreme left party Linke.

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To deal with the fallout from the coronavirus pandemic, the federal government this year borrowed a record 483 billion euros ($ 544.44 billion) from the financial markets, about a fifth more than in 2020 , when the show hit its previous record.

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

“Despite negative yields, German bonds are selling like hot cakes,” said Goerke, an opposition lawmaker Linke in the lower house of the Bundestag. “The federal government could have sold even more bonds without any problem.”

For the coming year, the German Finance Agency, the government’s debt management body, is forecasting a debt issue of 410 billion euros.

Rated “AAA” by all major rating agencies, German government bonds are highly sought after by investors as redemptions are considered very safe.

The paper market is also important, and large purchases by the European Central Bank increase demand, lowering yields.

($ 1 = 0.8872 euros)

(Written by Paul Carrel Editing by Madeline Chambers)


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