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(Bloomberg) — Germany will sell a smaller volume of federal debt next year as the government continues to cut aid to offset the effect of the Covid-19 pandemic and energy crisis.
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The government plans to factor about 440 billion euros ($481 billion) in debt, according to a statement released Tuesday through the federal financial agency. This compares to a record volume of around €500 billion in 2023.
The plan includes 248 billion euros in bond sales and 165 billion euros in bonds, as well as 17 billion to 19 billion euros in green bonds, the firm said.
German bonds maintained their gains after the announcement, with the 10-year yield falling on the day on core issues to 2. 03%, near its lowest point since March.
German federal government borrowing soared starting in 2020 to finance increased spending to deal with the fallout of the pandemic and ease the burden of emerging energy costs following Russia’s invasion of Ukraine.
After those crises subsided, Finance Minister Christian Lindner, who chairs the politically aggressive Free Democrats party, first insisted that Germany’s three-party coalition reinstate a constitutional cap on new borrowing for this year.
But last month’s surprise ruling by the nation’s highest court, which limited the use of extrabudgetary funds, upended the government’s fiscal plans, and Lindner forced the suspension of the mechanism known as the debt brake for a fourth straight year.
The governing alliance also left open the option of doing so again for next year’s finance plan.
–With assistance from Aline Oyamada.
(Updates with market reaction in fourth paragraph)
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