Federal Treasury Notes - Deutsche Finanzagentur (2024)

Federal Treasury notes are debt securities issued by the Federal Republic of Germany. Holders receive fixed interest payments (coupons) per year and repayment at full par value at maturity. Federal Treasury notes have the shortest maturities among listed German government securities.

Due to their comparatively short maturity of two years, Federal Treasury notes can be used specifically for short-term investment objectives. For example, the money can be invested at interest for purchases in the near future, or assets can be kept available at relatively short notice by continually reinvesting in Federal Treasury notes. Thanks to their constant annual interest payments and guaranteed repayment at full par value at maturity, the achievable returns can be calculated precisely at the time of investment.

Since Federal Treasury notes are traded on the stock exchange, investors can buy and sell them there on any trading day. In this case, however, the price movements during the term must be taken into account. Although Federal Treasury notes are always issued at a price close to 100 % and repaid at 100 % at maturity, changes in market interest rates usually cause their stock market price to fluctuate a little each day during the term. So, when purchased after issue, they can be bought either at prices below 100% (leading to price gains when held to maturity) or above 100 % (leading to price losses when held to maturity). Price fluctuations after purchase are only relevant if the Federal Treasury notes are sold before maturity. The following rule applies:

If the market interest rate rise, the bond price fall - if the market interest rate rise, the bond price fall.

Investors who correctly assess future interest rate developments on the bond market can achieve price gains (or price losses) with Federal Treasury notes in addition to regular interest income. These vary depending on the remaining term to maturity and the level of the coupon:
The longer the remaining term and the lower the coupon of Federal Treasury notes, the stronger their price reaction to changes in the interest rate level on the bond market.
Due to their relatively short maturity, Federal Treasury notes are the most volatile listed Federal securities.

Issuer Risk

The Federal Republic of Germany is liable for the repayment of Federal Treasury notes with its assets and tax revenues. Its ability to meet payment obligations arising from Federal Treasury notes determines the issuer risk. This risk is considered to be extremely low. Like all Federal securities, Federal Treasury notes are gilt-edged.

Price risk

The prices of Federal Treasury notes move in the opposite direction to interest rates on the bond market. In the event of a rise in interest rates, investors may suffer capital losses if they sell the Federal notes before maturity. Their price risk is lower than that of Federal Notes and Federal bonds (moderate). However, it can be completely eliminated by holding the Federal Treasury notes until maturity.

Liquidity Risk

The risk of not being able to sell Federal Treasury notes at any time before maturity is extremely low, as Federal Treasury notes are among the most heavily traded government bonds in the euro area and the Finance Agency and the Bundesbank maintain the market.

Federal Treasury notes are issued on fixed dates published in advance. These issuance dates, as well as the issuance volumes, are published in the form of an issuance calendar at the end of the previous year for the entire following calendar year. The coupons of the individual Federal Treasury notes are fixed a few days before the respective issue in line with the interest rate level on the bond market.

Banks and saving banks

Federal Treasury notes can be purchased daily on the stock exchange through almost any credit institution and held there in a securities account, where they can also be sold again if required. In principle, there is neither a minimum investment amount nor a maximum investment amount. Credit institutions generally charge fees for the purchase, sale and safekeeping of these securities.