BUND introduction and background |
Bunds are German government bonds with between 8.5 and 10.5 years to expiry. Bund rates are considered headline measures of German government debt prices and represent the long-term debts of the German state. Bunds typically trade at low yields and elevated prices, as the German government is considered one of the most financially stable major economies.
The short and medium-dated equivalents of Bunds are the Schatz and BOBL. During the lifecycle of a ten-year bond the same security will pass through a period as a Bund, BOBL, and Schatz. Investors may hold these bonds as low-risk cash equivalents or trade them in anticipation of price increases.
The yield of Bunds is determined by the financial standing of the German state and general investor confidence. As a safe-haven asset, Bunds may see price increases during times of general market volatility, depressing their yield.
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