The 1997 Guide to Germany: Bonds

Introduction

The German bond market has undergone dramatic changes over the last few years. Not only has liquidity increased sharply owing to higher borrowing in the wake of German reunification, but at the same time important new instruments have been established across the government yield curve ahead of Emu and in the context of the competition for becoming the European benchmark issuer. Moreover, the Pfandbrief segment experienced significant reforms in the last two years in the light of global competition in international capital markets. Since 1980 the volume of outstanding domestic Dm issues has risen by an average 12% per year. Thus, the total volume of Dm bonds outstanding has roughly doubled compared with 1990. The market for Deutschmark--denominated Eurobonds has experienced similarly rapid growth, volume having been persistently boosted as issuers and investors were drawn to an until recently appreciating currency.

Measured in terms of the nominal amount of bonds outstanding, the German bond market ranks third in the world after the US and Japanese markets. In terms of net sales of fixed interest securities, it has been the second largest market since 1992 by international standards. In Europe, the German bond market, with an outstanding volume of Dm3,667 billion (at the end of February 1997) occupies the leading position.