What is a Bund
A Bund is a bond issued by the federal government of Germany to borrow money. The buyer lends to the German state and gets a fixed interest payment (the coupon) plus the face value back at maturity.
Formal definition: "Bund" is short for Bundesanleihe, a nominal federal bond issued by the Federal Republic of Germany through its debt agency, the Finance Agency (Deutsche Finanzagentur). In market slang the word often covers all German federal debt.
Germany has a long record of not missing payments, so Bunds are treated as the euro area's benchmark "safe" bond. Other euro-area debt is priced against them.
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Bund yield
The Bund yield is the return a buyer earns if they hold the bond to maturity at today's market price. Price and yield move in opposite directions:
- When the price rises, the yield falls.
- When the price falls, the yield rises.
The coupon stays fixed. Only the market price changes, and that change moves the yield.
Worked example (hypothetical)
Germany issues a Bund at its face value with a fixed coupon.
Later, the European Central Bank raises rates and new Bunds come out with higher coupons. Nobody will pay full face value for the older, lower-coupon bond. Its price falls below par until its yield matches the new bonds.
If rates fall instead, the older bond's higher coupon becomes attractive. Its price rises above par and its yield drops.
To see the money effect with your own figures, use the bond and interest tools on the calculators page.
Where you see the term
- News: "Bund yields rose after strong German data" means Bund prices fell. Yield changes are quoted in basis points.
- Spreads: the gap between another country's bond yield and the Bund yield of the same maturity measures how much extra return investors demand to hold that debt. The Italy–Germany spread is the most watched example. See credit spread.
- Platforms and data screens: government bond yields are listed by country and maturity. German tickers usually start with "DE" or say "Germany". Bund futures trade on the Eurex exchange.
- Risk-off moves: in a flight to quality, money moves into Bunds, prices rise and yields fall.
Edge cases for experienced readers
- The German curve has names by maturity. Schatz means short-dated, Bobl means medium-dated and Bund means long-dated. Bund futures are standardised contracts on a basket of eligible bonds, and the cheapest-to-deliver issue drives pricing. See futures roll and front month.
- Negative yields are possible. In past low-rate periods some Bunds traded above the total of the payments they would return, so holders to maturity locked in a loss.
- Green Bunds are issued alongside regular ones with matching terms. The small yield gap between the pair is called the "greenium".
- Rate sensitivity depends on duration. Long Bunds move more in price for the same yield change. See bond duration.
- Leverage changes the risk. Bund futures and bond CFDs are leveraged. Leveraged trading can lose money fast, including more than you expect on a sudden yield move.
Related terms
Eurobond · Accrued interest · Bond auction · Default · Debt-to-GDP ratio · Derivatives · Trading glossary
Frequent questions
What does Bund mean in finance?
It is a German federal government bond. In everyday market use it often means German government debt in general, or the long-dated benchmark issue.
Why do traders watch the German Bund yield?
It is the euro area's reference rate for low-risk borrowing. Moves in it affect other euro bond yields and the euro, and they show whether markets are seeking safety.
Does a rising Bund yield mean the bond is worth more?
No. A rising yield means the bond's price has fallen.
Is a Bund the same as a Bund future?
No. A Bund is the bond itself. A Bund future is an exchange-traded contract based on a basket of eligible German bonds.
