Thanks to negative interest rates, the federal government again earned billions in debt this year. When issuing federal securities to finance the budget, including special funds, “payments totaling around 5.855 billion euros were received”. This emerges from a reply from State Secretary for Finance Florian Toncar (FDP) to a request from Bundestag member Christian Görke from the Left Party on Wednesday to the Reuters news agency. "Germany has a lot of problems, but state financing is not one of them," said Görke. "This year, too, the federal government earned billions in debt."
Because of the high corona costs, the federal government borrowed the record amount of around 483 billion euros on the financial market in the year ending.
That is around a fifth more than in the old record year 2020. The average return on federal securities issued was minus 0.56 percent, explained Toncar.
Nevertheless, the auctions were oversubscribed 1.7 times.
"Despite negative returns, German bonds go away like hot cakes," said Görke.
"The federal government could even have sold more bonds without any problems."
Returns are likely to remain negative
Experts assume that the environment for the new Federal Finance Minister Christian Lindner (FDP) will remain favorable. "The financing conditions for the federal government remain excellent," said NordLB economist Bernd Kampen. "We expect negative returns in the coming year as well." This is not least due to the fact that the European Central Bank (ECB) will not end its zero interest rate policy before 2023. If the pandemic is over and the economy improves again, the returns could fall will pick up in the second half of the year, especially those for long-term bonds. "But we do not expect a dramatic increase," said Kampen.
Left-wing politician Görke said that anyone who does not invest heavily in the face of negative interest rates is overexploiting German infrastructure. In the coalition agreement of the traffic light parties there are projects, but no price tags. How much money should really flow into schools, rails and solar panels cannot be found in it. "In times of negative interest rates and investment backlogs, the reform of the debt brake must be on the agenda immediately," said the left party's financial policy spokesman. “It's economic madness because it prevents investment. And it is political madness. "Federal Finance Minister Christian Lindner (FDP) should replace the old debt brake with a rule that enables borrowing to match the scope of investments.
For the coming year, the finance agency responsible for debt management plans to issue EUR 410 billion.
The federal government is very popular with investors, as its creditworthiness is given the top rating of “AAA” by all major rating agencies and repayment is therefore considered to be very secure.
There is also a huge market for trading in these papers, which is why federal securities for pension funds, asset managers and other investors enjoy near-cash status.
In addition, the ECB is acting on a large scale as a buyer of federal securities.
This increases demand, which in turn depresses returns.