The Finance Agency of the Federal Republic of Germany plans and organizes the financing of the federal budget and its special funds through the issuance of nominal interest-bearing German Government securities such as Federal Treasury notes, Federal notes and Federal bonds. In the case of such securities, the issuer undertakes to make a fixed annual interest payment (coupon) and to repay the debt at nominal value at the end of the term. Because interest is paid only once a year, the accrued interest is included in the purchase and sale. The bonds tend to have a longer term. As the regular interest payments on these securities are generally constant over the term of the bond, their issue price or trading price is used to determine a current market interest rate.
If the attractiveness of the security as an investment form increases due to the currency and/or the issuer, its issue or trading price rises and the interest rate falls. The risks that an investor takes on when buying such securities can be described as price risk (if one wants to sell the security before the end of the term), interest rate risk (the change in the market interest rate influences the market price), credit risk (the issuer could become insolvent or delay or suspend interest or repayment), currency risk (when buying a security with a different issue currency).
Among the listed securities, the “Schatzanweisungen” (treasury bills) are among those with the shortest maturity, which is a maximum of 2 years. There are non-interest-bearing 1-year treasury notes. The accrued interest on these bonds is repaid as a premium on the nominal value. Holders of the 2-year treasury notes receive a constant annual interest payment (coupon) and at the end a repayment at full face value.
In most cases, an increase in the interest rate may precede economic growth, while its decline may be seen as an indication of a slowdown. As Germany is the EU's financially strongest member state, this may have a corresponding impact on the euro exchange rate.
The chart of the entire available history of the "Germany 2-Year Note Auction" macroeconomic indicator.
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