Kiel Institute Focus
|No. 22 June 6, 2013|
by Jens Boysen-Hogrefe
Low bond yields have saved the German government €80 billion in interest since 2009
Yields for German government bonds reached record lows in recent months. The downturn in yields has now lasted since the start of the Great Recession, apart from a short disruption in the first half of 2011, and this has affected bills and bonds over all maturities (as shown in Figure 1 below). Papers with short maturities have partly reached negative yields. Having these low yields for such a long time have made a sizable relief for the public budget in Germany. This relief has been especially pronounced for the federal government which is responsible for roughly one half of Germany’s public debt. The gains of the federal government may be especially pronounced, since the bonds that they hold may function as a “safe haven” in Europe’s debt crisis. Other German public debtors, like the Länder and communities, are benefiting from low yields, too, but to a somewhat smaller extent.