Government bonds: Money for the budget

Countries finance themselves also by issuing government bonds. You as a private investor can exploit this for your portfolio.

Three reasons for government bonds

  1. Countries with prime credit ratings are suitable for risk-averse investors.

  2. Emerging markets woo investors with high yield opportunities.

  3. At Börse Stuttgart you can flexibly and reliably trade government bonds from all over the world in Euro.

Tops & Flops

Governments use bonds to raise money

Not only private individuals and companies have to finance purchases and business transactions. Countries also require capital in order to cover the expenditure foreseen in their budgets. One means of financing: government bonds. These debentures are floated direct by the government or by state institutions. They can differ greatly in terms of maturity, interest coupon and the type of repayment.

The level of interest is influenced by the credit rating and demand

Essentially, the weaker a country’s finances, the greater the interest it is forced to offer on its bonds. Risk-averse investors like to opt for bonds issued by countries such as Germany, the USA or France, with their high credit ratings, and therefore accept relatively low interest income as a result. By contrast, anyone wanting to generate a higher return and therefore shoulder greater risks can consider government papers from emerging markets such as Brazil, South Africa or Turkey.

The best-known bonds in Germany are Bunds. They are considered a safe haven thanks to the excellent credit rating Germany enjoys. That said, the level of interest derives not just from the issuer’s creditworthiness but also from supply and demand: Thus, in times of economic or geopolitical crises many investors search for safety and therefore buy Bunds or US Treasuries. And the more people are willing to acquire the bonds, the lower the interest that governments have to offer when issuing the bonds. Incidentally, the financial markets in particular consider 10-year Bunds as a yardstick for the current level of interest.

At Börse Stuttgart you can select from a broad range of government bonds that you can buy and sell each trading day between 8 a.m. and 6 p.m. Here you cannot only trade the minimum lots or multiples thereof, but adapt your order volume in small steps.