Bund

Categories: Forex, International, Econ

We have treasury bonds in the U.S.; in Germany, they are called bunds. And banks there are cleverly named BundesBank(en).

A bund is a debt security (bond) issued by the German Federal/Central Government, auctioned off to investment banks, and then sold in the secondary market. The proceeds are used to finance government spending, and usually have maturities of 10 to 30 years.

Bunds can also become “stripping bunds,” meaning the interest payments can be separated from the principal and traded separately. Bunds tend to become stripping bunds shortly after falling on hard times, when they are forced to do what they can to make ends meet.

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