Erfahrungen mit dem Bundesschatzbrief. Eine fiskalische Analyse

Abstract

The federal treasury bond, of which two variants - Types A and B - have been offered to private investors since early 1969, was originally conceived as a means to achieve wealth-policy objectives. However, this bond with its special debt-management features (scaled interest rates, bondholder’s right to call for redemption and continuous issue) is noteworthy, not for its objective, but for its growing (financing) contribution to the covering of rising budget deficits in past years. But the career of this federal bond, which at first sight appears extraordinarily successful, also has a seamy fiscal side. This is shown by a detailed analysis in which the monthly sales figures are related, with due allowance for the debt-management peculiarities of the federal treasury bond, to the interest rate trend on the loans market. It proves that the goal of interest-cost minimization was not given adequate consideration when issuing the federal treasury bond. Investors were conceded “super-yields”: On the one hand because a yield mark-down to offset the lack of any price risk, due to the bondholder’s right to call for redemption, was invariably not properly calculated, and on the other because the market interest-rate trend is not followed conterminously by corresponding announcements of impending amendments to conditions. It demonstrates further that from the standpoint of liquidity the federal treasury bond is an unreliable instrument of indebtedness. Instead of the continuous flow of funds hoped for from the continuous issue, marked monthly fluctuations were registered for both the gross receipts and the net receipts after premature redemption. The reason: the investors are better informed and react more sensitively to interest rates than was probably expected. This is evident, in particular, when investors switch to investments that bring higher interest as the level of interest rates rises, which is possible without any risk on account of the bondholder’s right to call for redemption. The premature redemption of the bonds has the effect of price sustainment at the expense of the federal household - with substantial, undesirable liquidity and financing pressures, which can be warded off only with additional expense. Hence the positive sales results and financing contributions of the federal treasury bond have their price.