Germany Plans to Cut 2017 Debt Sales Amid Balanced-Budget Push

  • Gross debt issuance to decline by nearly 11 percent in 2017
  • Drop in issuance to be led by shorter maturities, draft shows

German Chancellor Angela Merkel’s government plans to pare gross debt sales by almost 11 percent next year compared with 2016 as it pledges to balance the budget for the fourth year in a row.

The federal government’s 2017 issuance will drop to 185.2 billion euros ($209 billion) from an expected 207.2 billion euros this year, according to the draft budget published on the lower house of parliament’s website. German bonds rose for the first time in three days, with the 10-year yield falling two basis points, or 0.02 percentage point, to minus 0.05 percent.

The sale of maturities longer than four years will drop 1.7 percent to 98.1 billion euros while issuance of maturities between one and four years is set to decline 9.4 percent to 49.9 billion euros. The government plans to sell 37.2 billion euros worth of debt with maturities of less than one year, a decline of 28.7 percent, according to the draft.

Merkel has presided over a decline in German unemployment to the lowest levels in a quarter-century and her government has halted net new borrowing for the first time in decades. Finance Minister Wolfgang Schaeuble, speaking at a campaign event of his and Merkel’s Christian Democratic Union on Tuesday, vowed to restore confidence in the solidity of Germany’s state finances and social insurance systems after the financial crisis in 2007 left Germany with a “tremendous legacy” of debt.

Merkel’s cabinet on July 6 approved a spending blueprint that would keep the budget balanced through 2020 and cut the federal debt below the European Union’s ceiling of 60 percent of gross domestic product in 2020.

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