Germany aims to fill a gap in the debt market with a debut seven-year inflation-linked bond, but it will not cover the same maturity with paper with nominal yields, the head of the country's debt agency said on Friday.
"We are currently observing very large demand for the maturities of five to seven years," Heinz Daube told Reuters in written answers to Reuters questions.
"With the new seven-year bond we are serving the maturity of 2018, currently not yet occupied in the euro-denominated market," he said, but added there was no plan to cover the same maturity with other types of bond. "I see no link to (maturities of bonds with nominal interest rates)," Daube said.
The new linker launches on April 13 with a planned initial volume of 3 billion euros, but Daube did not specify how big the final size of the bond would be.
Germany currently has three inflation-linked bonds on the market with a total volume of 41 billion euros. Daube left open whether the debt management agency would issue a new 30-year linker this year, saying: "We are watching this market very closely. Demand has increased across all maturities."
Daube said previously that market conditions had improved enough for the debt management agency to issue a new 30-year linker as part of a number of inflation-linked issues this year. The likelihood for one was higher this year than in 2010.
Asked whether Germany could issue less debt this year than initially planned as its economy is steaming ahead, Daube said: "We are currently seeing very positive fundamental data in the market. The decision about an adjustment is solely with .... the issuer (the finance ministry)."
Germany has recovered faster than expected from its deepest recession since World War Two, and recent indicators show it is on a steady path of growth, shrugging off the debt crisis affecting some fellow eurozone states and maintaining healthy demand for its bonds.