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Germany could issue 50-year bonds, sources say

GERMANY – A German 50-year government bond could come in the future, despite official denials that Germany has no immediate plans to issue longer dated bonds, sources say.

Sources at the Finanzagentur, who asked not to be identified, said the agency and the ministry were watching the sales of 50-year government bonds in France and the UK very closely.

“A 50-year German Bund is not scheduled for now, but it could come in the future. All the government has to do is say it needs it and our job will be to make it happen,” the sources told IPE.

The comments come as the head of the Finanzagentur, which acts as the government’s treasurer, said Germany has no immediate plans to follow the lead of France and the UK in issuing 50-year bonds.

Gerhard Schleif said that following talks with the German finance ministry last autumn, it was agreed that a 50-year version of the German Bund would not be issued in 2005.

Explaining the reason, Schleif said that as the market for 50-year sovereign bonds was in its infancy, issuing the security was not more cost-effective than bonds with durations of two, five, 10 and 30 years.

“It only makes sense to open up a new market segment if there is enough demand,” said Schleif, who was speaking at a meeting with foreign banks in Frankfurt.

Last February, the French treasury AFT sold €19.5bn worth of government bonds that mature in 2055. The UK government was to follow France’s lead this month.

Experts say 50-year government bonds are especially suited to institutional investors like pension funds and insurers, noting that it helps them meet their long-term liabilities.

But during AFT’s sale, pension funds only accounted for eight percent of the volume and insurers 14%. Fund managers had the biggest appetite for the French bond, buying 45% of the volume.

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