The Federal Finance Agency has set the coupon for the new federal treasury bill at 1.9%. This bond, which will be issued on July 15, 2025, has a term until September 16, 2027, and an issuance volume of 5 billion euros.
Importance of the Coupon for Investors
This determination is crucial as it directly influences investors’ return expectations and investment behavior. A coupon of 1.9% signals a moderate return in the current interest rate environment, especially in the context of rising interest rates for longer federal bonds, such as the ten-year bonds, which have yields around 2.57%. This decision also reflects the federal financial planning, which aims to incur new debts of about 850 billion euros by 2029.
Benefits and Considerations for Investors
- Treasury bonds with a coupon of 1.9% offer a secure investment option with a medium-term duration.
- Compared to longer-term bonds, these short- to medium-term papers are less sensitive to interest rates.
- The coupon is below the yields of some longer federal bonds, such as the five-year federal treasury notes at approximately 2.2%, thus reflecting the current interest rate level for this term class.
Overall, the setting of the coupon at this level indicates a cautious environment for government bonds: on one hand, interest rates tend to rise due to the debt plans; on the other hand, confidence in German government securities remains high enough to allow for attractive conditions.
In summary: The federal government sets the coupon for its new treasury bills at 1.9%, which is considered a competitive return given the current market interest rates and influences investor behavior as well as the demand for secure government securities.