In an announcement anticipated for some time, the German Finance Agency (Bundesrepublik Deutschland Finanzagentur GmbH) finally confirmed today that it would make its holdings of Bunds available to the market through Clearstream.
This huge augmentation of liquidity in German government debt, which will be distributed to borrowers via the anti-fails Automated Securities Lending and Borrowing (ASL) programme at Clearstream, is a significant coup for the Luxembourg-based ICSD. Exclusive access to a significant new source of liquidity in the most important internationally traded government bond market, and especially one plagued by shortages and periodic squeezes, will give Clearstream an edge in its continuing battle with Euroclear to dominate the government bond business in Europe. For the Finance Agency, the attraction is additional income, which will reduce the overall cost of servicing the public debt.
“The potential daily injection of liquidity will benefit both Clearstream’s customers and the market as a whole through the increased efficiencies in the settlement process for German Government securities,” says Clearstream. “German government bonds are the most internationally traded and settled in three different locations. By making additional liquidity available through Clearstream, more timely settlement will be achieved for the benefit of the market as a whole.”
Saheed Awan, Executive Director Global Securities Financing Services at Clearstream Banking, believes the significance of the deal for Clerastream and the market is hard to over-state. “Clearstream, Deutsche Bundesbank and the Finance Agency together have devised this solution which is good for the whole market and provides an even more robust marketplace for German Government securities.”