hurricanemaxi
Joined: 17 Sep 2011
Posts: 83
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 Posted: Tue Sep 27, 2011 4:16 am Post subject: Germany Cuts Fourth-Quarter Debt Plan to $70 Billion as Tax |
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Germany cut its fourth-quarter debt-sale plan, the second quarterly reduction this year, after tax receipts boosted government coffers and reduced Chancellor Angela Merkel’s net new borrowing needs.
The government will cut gross borrowing in the last three months of this year by 16 billion euros ($21.6 billion), a 24 percent reduction from the initial amount, to 52 billion euros, the Federal Finance Agency said in an e-mailed statement today. The cuts mean that Merkel’s government trimmed 27 billion euros in debt sales this year from its original plan to 275 billion euros.
“The very low yields on the market present favorable refinancing conditions at the moment,” Finance Agency chief Carl Heinz Daube said in an interview. “Interest rates would, however, have to remain permanently low to achieve a lasting relief in interest expenses.”
German bonds stayed lower after the announcement. The yield on 10-year securities rose six basis points to 1.89 percent as of 9:51 a.m. in London. That’s below the average of 3.78 percent in the past decade. German bund yields fell to a record low of 1.64 percent on Sept. 23 as investors sought a haven amid signs the euro-region debt crisis, which started in Greece, in 2009 is worsening.
Tax Receipts
Export-fueled economic growth of about 3.6 percent this year and 26 straight months of falling unemployment have boosted corporate and income tax receipts, aiding Merkel’s efforts to rein in net new government borrowing. Merkel is committed, by a debt “brake,” to cut the federal deficit by half a percentage point each year until 2015.
Merkel may be able to push down this year’s compound national deficit to 1.5 percent of gross domestic product after it reached 3.3 percent last year, above the 3 percent threshold set by the European Union for all nations using the euro. Next year, the government aims to sell about 270 billion euros of debt, the draft budget shows. Net new federal borrowing will fall to 27.2 billion euros compared with about 30 billion euros this year.
In the fourth quarter, the agency will sell 39 billion euros in bonds, also called capital-market instruments, and 13 billion euros in bills, or money-market instruments. The agency also said it intends to issue about 2 billion to 3 billion euros of inflation-protected bonds in the last quarter of 2011.
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