Bond Shortage

More Money, Same Problems

Investors would have liked more €100 notes.
  • Why it matters

    Why it matters

    The absence of new debt issuances from Germany for a second straight year represents a problem for investors eager to park their money in uncertain times.

  • Facts


    • Germany is planning €214.6 billion in bond issues in 2016, up from $186.5 billion borrowed in 2015.
    • Surging tax revenues will help government finance the refugee crisis without new net borrowing.
    • Investors are still buying German bunds despite historically low yields.
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Europe’s largest economy has long been the biggest safe haven in Europe. The trouble is that Germany simply isn’t giving investors enough debt to work with.

The market for German debt has become extremely tight over the past few years, as the euro zone’s debt crisis scared some investors away from southern European countries and the European Central Bank has become a major buyer of government bonds for the past year.

For those investors who were hoping 2016 might be different, they will not have liked the latest plans unveiled by Germany’s supreme debt agency and its head, Tammo Diemer.

The German Finance Agency on Wednesday said it will issue no new debt in 2016 for the second straight year, though it will slightly increase its borrowing from financial markets in 2016 by issuing bonds worth a total of €214.5 billion, compared to €186.5 billion borrowed in 2015. The extra borrowing will be needed to refinance maturing securities.

Mr. Diemer’s hands are tied, thanks to Germany’s determination to balance its budget once again next year, despite the rising costs stemming from a flood of more than one million refugees that have arrived in the country this year.

All this leaves investors without many options if they want to invest in safe government debt.

“With the ECB continuing to buy bonds at full steam, there will not be that many German bonds left for investors,” Jan von Gerich, chief strategist at Scandinavian bank Nordea, wrote in a research note.

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