Chapter 5 of 15
Types of German Federal Securities
Schatz, Bobl, Bund, and how Germany finances its debt
10 min read
What securities does Germany issue and why?
How Germany Finances Its Debt
The German federal government finances its operations through Bundeswertpapiere (federal securities). With approximately €2.4 trillion in outstanding debt, Germany is one of the world's largest sovereign borrowers. These securities are issued by the Deutsche Finanzagentur (German Finance Agency) and managed through the Bundesbank's Bund Bidding System.
The Four Types of Federal Securities
| Type | German Name | Maturity | Use Case |
|---|---|---|---|
| Schatz | Bundesschatzanweisungen | 2 years | Short-term parking, low rate risk |
| Bobl | Bundesobligationen | 5 years | Medium-term core holding |
| Bund | Bundesanleihen | 7-30 years | Long-term allocation, pension funds |
| Bubill | Unverzinsliche Schatzanweisungen | 3-12 months | Cash management, money markets |
Schatz (Bundesschatzanweisungen)
The Schatz is a 2-year federal note. The name comes from "Schatz" (treasure) + "Anweisung" (directive/note). • Maturity: Always 2 years at issuance • Coupon: Fixed annual payment • Issue size: Typically €4-5 billion per auction • Ideal for: Investors wanting minimal interest rate risk while earning more than money market rates
Bobl (Bundesobligationen)
The Bobl is a 5-year federal obligation. "Obligation" is the German-French term for bond. • Maturity: Always 5 years at issuance • Coupon: Fixed annual payment • Issue size: Typically €4-5 billion per auction • Ideal for: The "sweet spot" balancing yield and duration risk—popular with institutional investors
Bund (Bundesanleihen)
The Bund is the flagship German government bond. "Anleihe" means loan/bond. • Maturities: 7, 10, 15, 20, and 30 years • 10-year Bund: The benchmark for all eurozone fixed income • Issue size: €3-5 billion per auction • Total outstanding: Over €1 trillion in Bunds alone • Ideal for: Long-term investors, pension funds, insurance companies, and as a hedge against economic uncertainty
Bubill (Unverzinsliche Schatzanweisungen)
The Bubill is a discount paper (zero-coupon). "Unverzinslich" means non-interest-bearing. • Maturity: 3, 6, 9, or 12 months • No coupon: Sold at discount, redeemed at face value • Issue size: €2-4 billion per auction • Ideal for: Cash management, money market funds, short-term liquidity
Key Characteristics (All Types)
- Bearer securities (Inhaberschuldverschreibungen) – transferable without registration
- AAA rated by all major rating agencies
- Book-entry form – no physical certificates
- Minimum denomination – €0.01 (highly accessible)
- Full faith and credit of the Federal Republic of Germany
The Auction Process
- Announcement: Published in auction calendar, details 4 days before
- Participants: ~30 members of Bund Issues Auction Group (primary dealers)
- Bidding: 8:00-11:30 CET via Bundesbank's electronic system
- Allocation: Multiple-price auction (pay what you bid)
- Retention: Finanzagentur may retain up to 20% for market interventions
- Settlement: T+2 via Clearstream
Inflation-Linked Securities
Germany also issues inflation-indexed Bunds (ILBs). Principal and coupon adjust with Eurostat HICP (ex-tobacco). Available in 10-year and 30-year maturities. These protect against inflation erosion but typically offer lower nominal yields.
Green Bonds
Since 2020, Germany issues Green Bunds to finance climate and environmental projects. Structured as "twin bonds" – identical terms to conventional Bunds but proceeds earmarked for green purposes. Premium pricing reflects strong ESG demand.
Choosing the Right Security
| Investment Goal | Best Choice | Why |
|---|---|---|
| Capital preservation | Schatz or Bubill | Minimal duration risk |
| Balanced approach | Bobl | Moderate yield, moderate risk |
| Maximum yield | Long Bund (30Y) | Higher yield, higher duration |
| Inflation protection | Inflation-linked Bund | Real return guaranteed |
| ESG mandate | Green Bund | Environmental allocation |
CURRENT MARKET SNAPSHOT
Typical outstanding amounts (2024): • Schatz: ~€150 billion across ~8 issues • Bobl: ~€200 billion across ~10 issues • Bund: ~€1,100 billion across ~40+ issues • Bubill: ~€20 billion (rolled continuously) The 10-year Bund yield is quoted on every financial terminal globally as the eurozone risk-free rate.
KEY TAKEAWAY
Match your investment horizon to the security. Schatz for short-term, Bobl for medium, Bund for long-term.