{
  "title": "German Bond Yields and Debt Supply: Is There a “Bund Premium”?",
  "publication": "IMF Working Papers, November 1, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/11/01/german-bond-yields-and-debt-supply-is-there-a-bund-premium-48730",
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  "summary": "Are Bunds special? This paper estimates the “Bund premium” as the difference in convenience yields between other sovereign safe assets and German government bonds adjusted for sovereign credit risk, liquidity and swap market frictions.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Research question: Are Bunds special?\n- Definition: The “Bund premium” is estimated as the difference in convenience yields between other sovereign safe assets and German government bonds adjusted for sovereign credit risk, liquidity and swap market frictions.\n- Main high-level findings:\n  - A rise in the “Bund premium” is documented in the post-crisis period.\n  - There is a negative relationship between the premium and the relative supply of German sovereign bonds.\n  - The negative relationship is more pronounced for higher maturities and when risk aversion (proxied by bond market volatility) is high.\n- Forward-looking expectation: German government debt supply is expected to remain scarce, with important implications for the ECB’s monetary policy strategy."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Bund premium: measured as convenience yield differential after adjustments for sovereign credit risk, liquidity, and swap market frictions.\n- Time pattern:\n  - Rise in the Bund premium in the post-crisis period.\n- Supply–premium relationship:\n  - Negative relationship between Bund premium and relative supply of German sovereign bonds.\n  - Stronger effect for higher maturities.\n  - Stronger effect when risk aversion is high (risk aversion proxied by bond market volatility)."
    },
    {
      "heading": "Policy implications and outlook",
      "content": "- Scarcity of German government debt supply is expected to persist.\n- Important implications for the European Central Bank’s monetary policy strategy, given the special status and convenience yield of Bunds."
    },
    {
      "heading": "Subjects and keywords (as listed)",
      "content": "- Subjects: Bond yields, Bonds, Financial crises, Financial institutions, Financial services, Sovereign bonds, Yield curve\n- Keywords: bond premium, Bond Supply, bond volatility, Bond yields, Bonds, Bund premia, Bund yield, Central Bank Quantitative Easing, convenience yield, debt supply, demand curve, Global, government bond yield, long-term debt, Sovereign Bond Yields, Sovereign bonds, WP, Yield curve\n\nIMF Working Papers — Anne-Charlotte Paret and Miss Anke Weber, November 1, 2019.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/11/01/german-bond-yields-and-debt-supply-is-there-a-bund-premium-48730"
    }
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    "Authors: Anne-Charlotte Paret, Anke Weber",
    "Published: November 1, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513518329.001",
    "Research question: Are Bunds special?",
    "Definition: The “Bund premium” is estimated as the difference in convenience yields between other sovereign safe assets and German government bonds adjusted for sovereign credit risk, liquidity and swap market frictions.",
    "Main high-level findings:",
    "Forward-looking expectation: German government debt supply is expected to remain scarce, with important implications for the ECB’s monetary policy strategy.",
    "Bund premium: measured as convenience yield differential after adjustments for sovereign credit risk, liquidity, and swap market frictions.",
    "Time pattern:",
    "Supply–premium relationship:",
    "Scarcity of German government debt supply is expected to persist.",
    "Important implications for the European Central Bank’s monetary policy strategy, given the special status and convenience yield of Bunds.",
    "Subjects: Bond yields, Bonds, Financial crises, Financial institutions, Financial services, Sovereign bonds, Yield curve",
    "Keywords: bond premium, Bond Supply, bond volatility, Bond yields, Bonds, Bund premia, Bund yield, Central Bank Quantitative Easing, convenience yield, debt supply, demand curve, Global, government bond yield, long-term debt, Sovereign Bond Yields, Sovereign bonds, WP, Yield curve",
    "**Working Paper**"
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