German Finance Agency initiates swaps programme

The German Finance Agency has begun its interest rate swaps programme to manage the risk on its debt portfolio. The Agency first gave an indication it would enter the swaps business in January, and now plans to transact up to €20 billion in swaps notionals this year.

Gerhard Schleif, managing director of the Finance Agency, said discussions on the legal and contractual details of the transactions had led to a delay in starting the swaps programme. Schleif explained that the swap programme was not intended specifically to reduce duration but for more general risk management purposes.

“Since the agency only announces its issuance calendar once a year, this gives us much more flexibility to manage our fixed income portfolio,” said Schleif. “We are now using this instrument as part of our regular business.”

Germany's move into the swaps market echoes initiatives by several major European countries over the past few years. France, Holland and Italy have been using swaps for a number of years now, and Spain is also planning on starting a swaps programme.