Transcript: Interview with German Finance Agency’s Tammo Diemer on 12 November 2025
24 November 2025
By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 12 November 2025 with Tammo Diemer, member of the Executive Board of the German Finance Agency.
Q: Mr Diemer, you recently raised your expected 4Q issuance by €15 billion, the second-largest increase for a fourth quarter in Germany’s history. Was the markets’ reaction to the news what you had expected?
A: The announced volume met market expectations. Yields went up a couple of basis points during our announcement but then reverted in the early afternoon. From today's perspective, that was a usual daily market movement. However, a few voices expressed slight surprise about the modest increase in the volume of the 15-year sector.
Q: What is your take on the slight increase in yields?
A: In the beginning of the year, the 10-year Bund yield was around 2.4%. And now in the 10-year sector we have yields ranging between 2.5% and 2.8%. Inflation expectations haven't changed within the year. Therefore, these slightly higher yields could be a result of higher supply or slightly higher growth expectations. The widening of the 10-year to 30-year spread is a global development, affecting not only the euro area but all major advanced economies.
Q: How far would bond yields have to rise across the curve before you start feeling a little bit uncomfortable?
A: Our annual interest expenditures account for 0.8% of our GDP. This is a relatively low figure by international standards. Another way to look at this is to analyze the average annual interest rate on our outstanding debt. We have an outstanding debt of €1.8 trillion, and we pay 1.75% interest on this amount, which is also low in international comparison. As a long-term issuer, we have a clearly long-term view. If you look at our history, you will see that the highest outstanding coupon we have is 6.25%. It was issued in 2000, and it will mature in 2030. We are a long way away from this level of interest rate. We are a market taker, so timing aspects or tipping points in interest rates play a minor role for us. A dominant role is played by our long-term strategy, which we implemented during the last years and will continue in 2026. We are observing higher term premia, and this is one of the factors we consider when determining the maturity structure of our refinancing instrument allocation. All details will be published in December.
Q: Looking further ahead, how much do you expect issuance volumes to rise under the new fiscal package? Could total bond sales in 2026 surpass €500 billion?
A: We are currently working on the 2026 issuance plan. Our highest financing volume so far was in 2023, when the federal government sold bonds worth €500 billion. And we definitely anticipate financing requirements to grow in the coming years.
Q: So, surpassing €500 billion could be likely in 2026.
A: Yes.
Q: Do you anticipate mid-year adjustments to issuance plans becoming a regular feature as your budget needs evolve?
A: In that sense, this was a special year. The new government presented a new agenda including changes in our constitution. So, now with this drafted five-year budget plan in our hands, we are confident that no adjustments, or only small ones, will become necessary in the next few years. This confidence is supported by the sufficient flexibility we have regarding our activities in the secondary market, the repo market and our significant liquidity reserve stemming from the liquidity pooling with official institutions.
Q: Is predictability still the guiding principle of your issuance strategy, or has flexibility become more important than strict calendar certainty?
A: Predictability remains the key element of our issuance policy, and our published calendar will continue to provide a high degree of certainty in the years ahead. However, we use multi-ISIN auctions in the 15-year and 30-year segments. In each auction, one ISIN (either a 15-year or a 30-year) will be the primary focus. The second ISIN will be selected based on what best serves market participants at that time. By tapping these off-the-run bonds, we can provide liquidity where and when it is needed. This is the key flexible feature within our otherwise predictable calendar.
Q: With the increase in issuance, do you anticipate any changes to the auction process in light of recent technically uncovered auctions?
A: No, we will continue to use our established auction procedure. This includes a multi-price auction format as well as a retained amount. This framework, which has developed over several decades, enables us to respond appropriately to market conditions. For example, if an auction is uncovered, we simply retain a larger amount than initially planned and then sell it over the following weeks or months in the highly liquid secondary market. This is a specific feature of the German primary market and mirrors the very liberal and market-oriented approach with our Bund auction group.
Q: Alternatively, are you not overly concerned about technically uncovered auctions and the resulting rise in retention amounts to cover the shortfall?
A: No. We have an established procedure that has been familiar to market participants for decades, and we have applied it successfully whenever a technical situation has arisen.
Q: How do you currently assess demand in the secondary market process?
A: The secondary market is very vivid for German government bonds. Secondary-market trading volumes have shown a positive trend in recent years, and this will continue into 2025. By the end of June, volumes were already up 4% compared with the same period last year, confirming the ongoing improvement in secondary-market liquidity. For German government bonds, this is supported by the very liquid futures market. To illustrate: the daily trading volume in bond futures is roughly five times the value of GDP generated across the entire euro area in a single day. In other words, if you take the euro area’s daily GDP and multiply it by five, you get the typical daily trading volume in futures. A similar ratio can be seen in the US Treasury market. The volume of Treasury futures traded in Chicago is about five times the US’ daily GDP. This shows that German government bonds play a comparably central role in the euro area to that of US Treasuries in the dollar market.
Q: With issuance volumes increasing, are you considering a broader use of syndications?
A: We will continue to use syndications in 2026, with a focus on the long end of the curve.
Q: What is the range that you're currently looking at for maturities next year?
A: The usual range remains unchanged, spanning from bills to 30-year bonds. This is the same range offered, for example, by the US Treasury.
Q: Regarding next year’s issuance, what should markets expect in terms of maturities and timing?
A: Our issuance pattern is very predictable: we issue bills; we introduce a new 2-year bond each quarter; a new 5-year bond every six months; a new 7-year bond each year; a new 10-year bond every six months; a new 15 and 30-year bond every one to three years. This high degree of predictability reflects the crucial role we play for the euro area and the depth of the secondary market, where there is no room for surprises or unpredictability coming from the primary market. Next year, we expect the same issuance structure as in the past, but with higher volumes. These larger financing needs will reinforce and strengthen our role as the euro area’s reference issuer.
Q: You recently said that 50-year bonds are not on the table for now. What factors might lead you to revisit that decision?
A: We have had many discussions with investors on this, beginning in early spring and ending in late summer. As a result, we see only very isolated structural demand for ultra long bonds. Therefore, the federal government will not launch a strategic market presence in the ultra-long segment in the foreseeable future.
Q: Where along the curve are you currently seeing the strongest investor demand?
A: The average bid-to-offer ratio in our auctions this year was 1.7, the same as last year. In other words, demand exceeds the offered volume by a factor of one point seven on average. This is significantly higher than about ten years ago, when the ratio was closer to 1.2. A closer look at this year’s auctions also shows that demand at the long end of the curve was above average, as was demand for our green bonds.
Q: Would you ever consider issuing in a foreign currency if conditions made it attractive?
A: This is currently not planned.
Q: How do you balance green issuance with the need to preserve liquidity in conventional benchmark bonds?
A: Ensuring well-functioning German government bond markets is, as mentioned, a key objective and priority for us. This particularly means providing sufficient liquidity in conventional bonds and across standard maturities. Looking ahead, the projected level of medium-term federal financing needs does not suggest any shortage in this respect. As a result, our green bond issuance will not compromise liquidity in the conventional market.
Q: Do you expect green issuance to become a fixed share of annual funding or is it to remain more opportunistic?
A: Green bonds are now a firmly established part of our annual funding program. For six consecutive years, Germany has issued green bonds in the low double-digit billion-euro range per year, and this is expected to continue. It is a substantial volume, though still small compared with our conventional bond issuance.
Q: So, given your rising issuance and potentially higher yields, do you see any risk to Germany's safe haven status?
A: No. Germany clearly remains the safe haven within the euro area. Risk premia have increased because investors seek compensation for uncertainty, especially when committing to longer maturities. However, the widening of spreads between 10- and 30-year yields is a global development, affecting not only the euro area but other major currency regions as well. Accordingly, it reflects greater market uncertainty on a global level about inflation, uncertainty about growth prospects, uncertainty about fiscal plannings and geopolitical risks.
Our market presence continues to meet all the criteria relevant to our safe haven status: liquidity, reliability, transparency and an excellent market infrastructure.
Q: Is the German AAA rating at all under threat considering higher borrowing needs, increased spending and global economic challenges?
A: Germany’s credit rating is supported by a range of factors, including our diversified and competitive economy, social and political stability, a reliable constitutional and legal framework, and the financial flexibility as the euro area’s benchmark issuer. The additional fiscal room for defense spending and infrastructure investment should enhance Germany’s competitiveness and long-term growth prospects. In other words, the rating is grounded in factors that are not undermined by this higher spending.
Q: Some other sovereign issuers in Europe are planning on issuing defence bonds. Will Germany do anything about this?
A: No, it's not on the table. We will focus on our conventional market and our green bonds.