Germany to Sell Record Debt of Up to $576 Billion in 2021

(Bloomberg) -- Germany will sell a record amount of federal debt in 2021 to help prop up the economy in the second year of the coronavirus crisis.

Europe’s benchmark issuer plans to sell as much as 471 billion euros ($576 billion) in bonds and bills, easily exceeding a previous high of 407 billion euros sold this year, according to the Federal Finance Agency’s provisional calendar published Thursday.

“The comparatively high issuance volume is primarily a consequence of the Covid-19 pandemic,” the agency said in a statement. The debt issuance includes funding for two special vehicles -- the Economic Stabilisation Fund to counter the fallout from the pandemic and the Financial Market Stabilisation Fund, set up during the financial crisis in 2008.

The agency also plans to sell a maiden 30-year green bond in May and as much as 8 billion euros in inflation-linked securities. Two of next year’s debt sales will be syndicated.

Spending to alleviate the fallout from the pandemic will exceed federal income and swell net new debt to about 180 billion euros next year, according to the budget approved last week in the lower house of parliament.

The government in Berlin is counting on the coronavirus receding as the year unfolds, allowing a constitutional “debt brake” to be restored in 2022 after a two-year suspension.

Commerzbank AG expect issuance of 30-year debt to be slightly lower next year. “Considering that the total funding requirement increases, this means that the duration impact is less severe than it could have been,” said Christoph Rieger, head of fixed-rate strategy.

Budget discipline and economic growth in the years following the banking and debt crises of the last decade helped Germany trim debt below its Group of Seven partners, but budget experts in parliament have warned that bloated virus spending cannot be sustained much longer. The nation adopted stricter lockdown rules Wednesday that will run until at least Jan. 10.

Germany’s first 30-year green bond augments inaugural sales of 10- and five-year paper this year. “The federal government’s issuance plans envisage that in 2021 green federal securities will be issued with a similar volume as in 2020,” the finance agency said.

Germany’s bonds held gains following the announcement. The 10-year yield was one basis-point lower at minus 0.58% while the premium between five- and 30-year debt held steady at 58 basis points.

©2020 Bloomberg L.P.