By Todd Buell

FRANKFURT (MNI) – The German government is maintaining its
commitment to build a complete curve in the inflation-linked (“linker”)
market segment, Carl Heinz Daube, the head of Germany’s Federal Finance
Agency told Market News International in a written interview.

The right circumstances for issuing in a foreign currency are few
and far between, Daube noted, saying that Germany will not go in this
direction — as it did about one year ago — unless sufficient volume is
available.

He also rejected claims that Germany is profiting from the
financial crisis because of its status as a “safe haven” for investors.

Asked under what circumstances Germany might issue a 30-year
linker, Daube said that the government “intends to stick to its
announced strategic path of building up a complete curve in the market
segment.”

“This is planned to be realized with regular issues in benchmark
maturities and taps, all depending on investor demand and market
conditions,” he explained. “[Future linker issuance] depends on a nice
arbitrage opportunity,” he added.

On Thursday, Germany slashed its linker issuance target for the
remainder of the year, and it now aims to sell E2-3 billion per quarter,
rather than E3-4 billion as it had previously planned. So far this year,
it has issued E3 billion in each of the first three quarters.

Turning to foreign currency bonds, Daube said that the two U.S.
dollar-denominated bonds issued over the last five years “have
contributed to interest cost savings [compared] to euro fundings in the
same maturity segment.” But “such situations are rare in the market,” he
conceded.

“We are not interested in issuing a dollar bond if potential volume
is not sufficient for us,” he explained.

Given that the 2011 budget is still being worked on, Daube said it
“makes no sense” to speculate about how much the government would issue
next year.

Germany had planned to issue E14 billion more in gross issuance
this year than in 2009, but given the improved budgetary and economic
situation, it will wind up issuing E17 billion less, the government
announced Thursday.

Daube dismissed the notion that Germany was actually profiting from
the financial crisis given the high demand for German securities and the
corresponding drop in yields. “Independent of the current market
environment, Germany benefits from its benchmark status expressed also
in lower yield levels compared to other sovereigns,” he argued.

Looking ahead, “I can’t see any risk or any threat to Germany
losing its status as a safe haven for investors,” Daube said.

–Frankfurt bureau; +49-69-720142; tbuell@marketnews.com

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