Buying German Bonds Directly: The Door That Closed

Buying German Bonds Directly: The Door Germany Closed

Can you buy German bonds without going through a bank? For nearly a decade, the answer was yes. All you had to do was open an account with the German Treasury, fill out a form in German using online translators, and wait for the mail. That path is no longer available to individual investors: the Finanzagentur phased out direct sales of its products in 2012, just as half of Spain was looking for a safe place to put their money away from country risk. Reconstructing how that mechanism worked is the best way to understand what remains today.

What is the Finanzagentur and who issues German debt

The agency that issues German state debt is not the Bundesbank, but the Bundesrepublik Deutschland Finanzagentur, the Finanzagentur. It handles the issuance of bunds, bonds, and Treasury bills, and it also offered the Tagesanleihe, the star product for small savers. Among its advantages was allowing investments from minimal amounts, without the six-figure threshold that some banks demand.

The name didn't sound entirely foreign in Spain. Its logo bore a suspicious resemblance to the one that won an ideas competition to renew the institutional image of the Spanish Government, a fact that was commented on with a smirk among those first interested. The anecdote, true or not, served to remind people that a public agency existed just across the Pyrenees.

How to open an account with the German Treasury from Spain

It couldn't be done online. The form, the Antrag zur Eröffnung eines Schuldbuchkontos, had to be downloaded, filled out, and sent signed along with the signature and stamp of the bank where the applicant held their account. Once peine, purchases and sales could be made online, with PIN and TAN sent by mail. The data arrived in separate letters, and the PIN took so long that more than one person wondered if the file had been lost in the shuffle.

There was a very common intermediate route: first opening a non-resident account at Deutsche Bank in Germany. All of them seemed to end up at branch 100. The account had a fixed monthly maintenance fee of 4 euros, free transfers within the EU up to 50,000 euros, and a guarantee of 2,500 euros blocked if a card was requested. Changing the PIN cost 5 euros.

The numbers: from bonds at 3% to bills at 0%

In the early years, German debt paid something. In 2009, bank quotes showed bonds with a 4.5% coupon and June maturity, with a yield of 2.70%, and another at 4% with September 2010 maturity and a yield of 3.10%. In the midst of the financial storm, the German safe haven still offered 2.5% to 3%.

The picture reversed with the euro crisis. When the Spanish risk premium soared, money fled to German debt, and yields plummeted: one-year Treasury bills even offered 0%. The tables showed 0% bills for one, two, and three years, 0.12% for four, 0.35% for five, 0.54% for six, and 0.68% for seven. Paying for the privilege of having your money kept safe no longer sounded crazy.

Fees: what each bank charges for German debt

Buying through an intermediary has a cost. In Germany, banks cannot charge for direct acquisition of debt in the primary market but can charge for its custody. At Deutsche Bank, this translated into a 0.10% fee per deposit of these products, a figure that, according to a forum user's calculations, eats up a good portion of the yield on a 0.38% bill. Commerzbank charged 4.90 euros plus 0.25%, with a minimum of 10 euros. Banco Popular charged around 0.2% plus a coupon collection fee, and another entity mentioned a brokerage fee of 0.30%.

This range explains why the direct account with the Finanzagentur was so appealing: as was said in the thread, with no management fees, the only hurdle was the transfer from the German Treasury to the investor's account.

Taxes: where a non-resident pays

Being a fiscal foreigner in Germany—not being registered there—activates the double taxation treaty. The German state withholds nothing on interest, and the obligation to declare and pay falls to the tax authority of the country of residence, in this case, Spain. Anyone who maintained an account in Germany and kept their fiscal residence there would have a different treatment, a scenario few considered.

There was also a detail that was often repeated: the obligation to inform the Spanish administration about opening accounts abroad, with non-compliance being punishable.

The closure of the direct channel and what remains today

The Finanzagentur gradually shut down direct purchases for individuals. December 31, 2012, was the last day to acquire the Tagesanleihe, and since September 12, 2012, it had stopped selling state bonds to individual investors. Those who were late found the door closed.

Today, alternatives include European brokers, investment accounts with German banks like Commerzbank, or futures on German debt—Bund, Bobl, Schatz, and Buxl—where the Schatz requires collateral of about 400 euros per contract. It's not the same, but it maintains exposure to German federal debt without buying the entire bond.

The closure fueled theories about whether Germany was blocking direct purchases due to saturation or to avoid further inflating the TARGET system against a potential euro breakup, with antiestéticars that Spanish savings in Germany could be converted into new marks or directly frozen. These remained mere conjectures. The only certainty was what was already noted in 2009: you don't come here to make money, you come here to not lose it. And to pay for it.