Germany deepens government bonds: billions for defense and future!

Germany deepens government bonds: billions for defense and future!

Frankfurt am Main, Deutschland - Germany plans to invest comprehensive billion dollar investments in the areas of defense and infrastructure in order to counter future challenges. In order to finance these investments, the state intends to increasingly accept government bonds. The Finanzagentur GmbH , based in Frankfurt am Main, is responsible for the implementation of these measures.

Important details about government bonds have been announced. Only institutional investors, such as credit institutions or companies based in the EU or the European Economic Area, can acquire government bonds directly from the finance agency, with the minimum amount of one million euros. Private individuals have had no direct access to these bonds since 2013, but can act on stock exchanges, such as the German Financial Agency

The auction process and the demand

The federal bonds are awarded weekly and is based on the principle of supply and demand. The auction process is handled using an electronic bidder system, which is operated by the Deutsche Bundesbank. An expert commission of the finance agency decides on the distribution of bonds and the corresponding interest rates. Despite the challenges of the global economy, the demand for German government bonds remains high worldwide, especially in Europe and Asia, since central banks, state funds and pension funds are interested in liquidity.

The interest for government bonds have increased since the new debt plans have been announced. They currently commute around 2.5 percent for ten years after they were 2.4 percent in February. In the years 2019 to 2022, the interest was even negative due to interventions by the central banks.

The role of government bonds in the economic system

Modern money theory (MMT) has revolutionized the understanding of state financing. Bonds are not only an instrument for financing deficits, but also serve to control interest rates and money supply. According to Faster Capital , the sale of bonds can take over excess currency, which contributes to inflation control and they offer investors a safe place Savings.

Another aspect of the MMT is the view of government bonds as instruments for economic stability. The interest control by issuing bonds can contribute to currency value stabilization, while you can also send a political signal for the market. However, critics of the MMT indicate inflation risks and doubt the practical applicability in small economies.

The assessment of the managing director of the Federal Finance Agency, Tammo Diemer, is positive; He does not believe that the federal government will go out. In view of the uncertain US customs policy, capital and German government bonds are also increasingly flowing into European and especially German government bonds. This shows the trust that investors have in the stability of the German market.