Monday, December 13, 2021
“AAA” rating helps
The federal government borrows almost half a trillion euros
The federal government borrowed more money than ever from investors in 2021. That comes from the figures of a commissioned finance agency. The decisive factor is not only the record new debt in this year’s budget of up to 240 billion euros, but also old liabilities.
This year the federal government borrowed a record sum of almost half a trillion euros from investors. At 120 auctions, a total of 463.5 billion euros were collected on the money and capital markets, as the finance agency responsible for debt management announced after the last auction this year. Another 7.7 billion euros were raised through ten auctions of inflation-indexed federal securities, while two syndicates also raised a total of 11.5 billion euros.
Many states have accumulated more debt as a result of the corona pandemic, while governments pumped billions into companies to keep them from collapsing because of the lockdowns. The Bundestag therefore decided in April the supplementary budget 2021 with a record new debt of up to 240 billion euros. Not only this amount has to be covered by new debts, but also the refinancing of old debts. In the summer quarter alone, around 100 billion euros in old debts had to be repaid.
The federal government is very popular with investors, as its creditworthiness is given the top rating of “AAA” by all major rating agencies and the repayment is therefore considered to be very secure. There is also a huge market for these papers to trade, which is why federal papers enjoy near-cash status for pension funds, asset managers and other investors. In addition, the European Central Bank (ECB) acts on a large scale as a buyer of federal securities. This increases demand, which in turn depresses returns.
In the last new issue of non-interest-bearing Treasury notes with a twelve-month term this year – so-called Bubills – the average return on Monday was minus 0.7556 percent, as the finance agency announced.