German Government Bond

German bonds are called Bunds, short for Bundesanleihen, and they range in maturity dates from two to thirty years. The two-year bonds are called schatze, five-year bonds are called bobls, ten to thirty-year bonds are called bunds or buxl.

Governments need money for everything from infrastructure to social programs; and a government bond is nothing more than a loan to the government in the amount of the bond. In return for this loan, the bond holder will receive interest on the loan and will be paid back at an agreed upon time. The government is known as the bond issuer.

The German Government bond issuance is considered the gold standard of the European bond market. Most German bonds are held by large groups that facilitate pension plans, hedge funds, retirement funds and medical insurance; most individuals own the bonds only through these large groups, and only a few have the bonds in their personal portfolio.

Evidence that the recession is almost over continues to mount, and concerns are growing that interest rates will continue their recent ascent. Because bond prices move opposite interest rates, there would be further declines in U.S. Treasury bond prices. That prospect is reason why many analysts advise investors not to invest in long-term Treasury bonds until their yields surpass 4%, or perhaps even 4.5%.

However, foreign markets are doing better in the shorter term. It is possible to get 6% or better from a global issuer with the stature of Deutsche Bank. Moody's says that global economies have started to heal and that there are signs of stabilization among foreign bond issuers and that they seem to be doing better in the current financial crisis than U.S. bonds.

Because it is difficult for an individual investor to buy German government bonds through U.S. banks, it is recommended that an investor go to a German bank and let them make the required purchases. However, most foreign bonds are not available for under 100,000 in the foreign currency. Because Germany has changed over to the Euro, this means roughly 140,000 US dollars. This is why the holders of German bonds are usually large groups and financial institutions who run hedge funds and other large investment instruments.