The complete history of German bond yields, from Napoleon to Angela Merkel

AP Photo
Any given day in the global bond market can be fairly snooze-worthy. Bond yields tick up by a few basis points, and down by a few basis points. Ho-hum. That’s the case today in the market for German government bonds (known as bunds). Yields on the 10-year bund declined by about four basis points, or 0.04 percentage points, to 1.12%. In other words, low.
But in my experience, the best way to make sense of the the bond markets is by looking at a long time series. That’s usually when the noise of a meandering market gives way to a clear signal. You can see that the recent run lower in bund yields—prompted by an easier-sounding European Central Bank, disinflation, and scary developments in Ukraine—has pushed yields down to their lowest level in recent history.

But there’s more. We grabbed estimates of long-term bund yields from data provider Global Financial Data. With the best numbers we have going back to 1815, these are the lowest German bond yields on record. Pretty remarkable.

Now, it’s best to think of these numbers as a broad estimate of interest rates. The benchmark 10-year bund that hit a low today didn’t exist 200 years ago, not least because Germany as we know it today didn’t exist 200 years ago.
Back in 1815, the dominant power in the confederation of German-speaking states, formed that year after the final defeat of Napoleon Bonaparte at Waterloo, was the province of Prussia. So the numbers that start in 1815 in the chart above are estimates based on the yield of Prussian government bonds. German Imperial government bonds were used from the 1870s. Government-backed mortgage bonds began in the 1920s. Bonds issued by Hitler’s Third Reich are the benchmarks for the 1930s and immediately after the war. Through the 1950s and 1960s, a mix of West German government bonds were used. Starting in 1980 the Bundesbank’s constant maturity 10-year bond is used, which is comparable with today’s bond yields.
At any rate, if you’re going to have long-term data series like this in the world of fixed income, a certain amount of stitching and pasting is required.
Also, cutting. You may have noticed the odd gap in the graph around 1920. That’s because I axed the yield data around the hyperinflation of 1922-23, which rendered Germany’s bonds worthless. And it’s not just me. The irreplaceable survey of interest-rate history, the appropriately titled A History of Interest Rates, also leaves those years out. “Unfortunately, no bond yields at all were computed by the sources quoted for the inflation years of 1922 and 1923, no doubt because of the chaotic state of the market and the currency,” the authors wrote. Rates stabilized a bit in 1924, where the series picks up.
The government held yields steady throughout the war years. After the war, yields on West German bonds rose, along with those of most advanced economies (although apples-to-apples comparisons are impossible because of various changes to how the bonds were taxed).
German yields most recently spiked in the 1990s around the time of the reunification. But since then, it’s been pretty much a one-way ride to the record low levels we see today.
OTHER GERMAN GOLD BOND
1. German External Loan 7% 1924 (Dawes)
2. German Reich 5% External Loan of 1930 (Kreuger Loan) Fifty Year Gold Bonds
3 German Government International 5 1/2% Loan of 1930 (Young)
4. Free State of Prussia 6 1/2% Sinking Fund Gold Bonds-External Loan of 1926
5. Free State of Prussia 6% Sinking Fund Gold Bonds-External Loan of 1927
6. General Electric Company 7% Twenty-Year Sinking Fund Gold Debentures 1925
7. General Electric Company 6 1/2% Fifteen-Year Sinking Fund Gold Debentures 1925
8. General Electric Company 6% Twenty-Year Sinking Fund Gold Debentures 1928
9. Bavarian Palatinate Consolidated Cities 7% External Serial Gold Bonds 1926
10. Free State of Bavaria 6 1/2% Serial Gold Bonds 1925
11. Free State of Bavaria 6 1/2% External Twenty Year Sinking Fund Gold Bonds 1925
12. City of Berlin 6 1/2% Twenty-Five year Sinking Fund Gold Bonds 1925
13. City of Berlin 6 % Thirty year External Sinking Fund Gold Bonds 1928
14. Consolidated Hydro-Electric Works of Upper Wurttemberg 7% First Mortgage Thirty-Year Sinking Fund Gold Bonds 1926
15. Brown Coal Industrial Corporation 6 1/2% Sinking Fund Mortgage Gold Bonds Series A 1928
16 State of Bremen 7% Ten Year External Loan Gold Bonds 1925
17 Protestant Church in Germany Welfare Institutions Loan 7% Twenty Year Secured Sinking Fund Gold Bonds 1926
18 German Atlantic Cable Company 7% First Mortgage Twenty-Year Sinking Fund Gold Dollar Bonds 1925
19 Central Bank of German State & Provincial Banks, Inc. 6% First Mortgage Secured Gold Sinking Fund Bonds Series A 1927
20 Central Bank of German State & Provincial Banks, Inc. 6% Mortgage Secured Gold Sinking Fund Bonds Series B 1927
21 German Provincial and Communal Banks Consolidated Agricultural Loan 6 1/2% Secured Sinking Fund Gold Bonds Series A 1928
22 German Central Bank for Agriculture 7% First Lien Gold Farm Loan Sinking Fund Bonds 1925
23 German Central Bank for Agriculture 6% Farm Loan Secured Gold Sinking Fund Bonds 1927
24 German Central Bank for Agriculture 6% Farm Loan Secured Gold Sinking Fund Bonds Second Series of 1927
25 German Central Bank for Agriculture 6% Farm Loan Secured Gold Sinking Fund Bonds Series A of 1928
26 German Consolidated Municipal Loan 7% Sinking Fund Secured Gold Bonds 1926
27 German Consolidated Municipal Loan 6% Sinking Fund Secured Gold Bonds 1927
28 Dortmund Municipal Utilities 6 1/2% Twenty Year Dinking Fund Mortgage Gold Bonds 1928
29 City of Duesseldorf 7% External Series Gold Bonds 1925
30 City of Duisburg 7% Serial Gold Bonds 1925
31 Unterelbe Power & Light Company 6% Twenty Five Year Sinking Fund Mortgage Gold Bonds Series A 1928
32 Electric Power Corporation 6 1/2% First Mortgage Sinking Fund Gold Bonds 1925
33 Electric Power Corporation 6 1/2% First Mortgage Sinking Fund Gold Bonds 1928
34 City of Frankfort-on-Main 7% Serial Gold Bonds External Loan of 1925
35 City of Frankfort-on-Main 6 1/2% Twenty-Five Year Sinking Fund Gold Bonds Municipal External Loan of 1928
36 Municipal Gas & Electric Corporation of Recklinghausen 7% First Mortgage Twenty-Year Sinking Fund Gold Bonds 1927
37 Roman Catholic Church in Bavaria 6 1/2% Twenty-Year Sinking Fund Gold Bonds Series A 1926
38 Berlin Electric Elevated and Underground Railways Company 6 1/2% Thirty YEar First Mortgage Sinking Fund Gold Bonds 1926
39 Gesfurel 6% Sinking Fund Gold Debentures 1927
40 Mannheim and Palatinate Electric Companies 7% Fifteen Year Sinking Fund Mortgage Gold Bonds 1926
41 Good Hope Steel and Iron 7% Twenty Year Sinking Fund Mortgage Gold Bonds 1925
42 Hamburg Elevated Underground and Street Railways 5 1/2% Ten Year Gold Loan 1928
43 State of Hamburg 6% Twenty Year Gold Bonds 1926
44 City of Hanover 7% Ten Year External Convertible Gold Bonds 1929
45 City of Hanover 7% External Sinking Fund Gold Bonds 1929
46 Harpen Mining Corporation 6% Gold Mortgage Bonds of 1929
47 Province of Hanover Harz Water Works 6% Sinking Fund Gold Bonds First Series 1927
48 Province of Hanover Harz Water Works 6 1/2% Sinking Fund Gold Bonds Second Series 1929
49 Ilseder Steel Corporation 6% Gold Mortgage Bonds 1928
50 City of Cologne 6 1/2% Twenty-Five Year Sinking Fund Gold Bonds of 1925
51 Koholyt Corporation 6 1/2% First (Closed) Mortgage Sinking Fund Gold Bonds 1928
52 Municipal Bank of the State of Hessen 7% Serial Gold Bonds 1925
53 Luneburg Power, Light and Waterworks, Ltd. 7% First Mortgage Twenty Year Sinking Fund Gold Bonds 1928
54 Mansfeld Mining and Smelting Company 7% Fifteen-Year (closed) Mortgage Sinking Fund Gold Bonds 1926
55 Miag Mill Machinery Company 7% Closed First Mortgage Thirty Year Sinking Fund Gold Bonds 1926
56 City of Munich 7% Serial Gold Bonds 1925
57 North German Lloyd Bremen 6% Twenty Year Sinking Fund Gold Bonds 1927
58 City of Nuremberg 6% External Twenty-Five Year Sinking Fund Gold Bonds 1927
59 Oberpfalz Electric Power Corp 7% First Mortgage Sinking Fund Gold Bonds 1926
60 Free State of Oldenburg 7% External Serial Gold Bonds
61 Prussian Electric Company 6% Sinking Fund Gold Debentures 1929
62 Rheinelbe Union 7% Twenty-Year Sinking Fund Mortgage Gold Bonds 1926
63 Rhine Westphalia Electric Power Corp 7% Direct Mortgage Gold Bonds 1925
64 Rhine Westphalia Electric Power Corp 6% Consolidated Mortgage Gold Bonds 1928
65 Rhine Westphalia Electric Power Corp 6% Consolidated Mortgage Gold Bonds 1930
66 Rhine Main-Danube Corp 7% Sinking Fund Gold Debentures Series A 1925
67 Roman Catholic Church Welfare Institutions in Germany 7% Twenty-Year Secured Sinking Fund Gold Bonds Series A 1926
68 Ruhr Chemical Corporation 6% Sinking Fund Mortgage Bonds 1928
69 Ruhr Gas Corporation 6 1/2% Secured Sinking Fund Bonds Series A 1928
70 Ruhr Housing Corporation 6 1/2% First Mortgage Sinking Fund Bonds 1928
71 Leonhard Tietz, Inc. 7 1/2% Twenty-Year Mortgage Gold Bonds 1926
72 Consolidated Municipalities of Baden 7% External Sinking Fund Gold Bonds 1926
73 Westphalia United Electric Power Corporation 6% First Mortgage Sinking Fund Gold Bonds Series A 1928
74 United Industrial Corporation 6% Hydro-Electric (closed) Mortgage Sinking Fund Gold Bonds 1925
75 United Industrial Corporation 6 1/2% Sinking Fund Gold Debentures 1926
76 United Steel Works Corporation 6 1/2% 25 Year Sinking Fund Mortgage Gold Bonds Series A 1926
77 United Steel Works Corporation 6 1/2% 25 Year Sinking Fund Mortgage Gold Bonds Series C 1926
78 United Steel Works Corporation 6 1/2% 20 Year Sinking Fund Debentures Series A 1927
79 Vesten Electric Railways Company 7% First Mortgage Twenty Year Sinking Fund Gold Bonds 1927
80 Rhine-Ruhr Water Service Union 6% Twenty-Five Year Sinking Fund External Gold Debentures 1928
81 Housing and Realty Improvement Company 7% First (Closed) Mortgage Twenty Year Sinking Fund Gold Bonds 1926
82 State of Wurttemberg Consolidated Municipal External Loan 7% Serial Gold Bonds 1925
83 City of Heidelberg 7 1/2% External Twenty-Five Year Sinking Fund Gold Bonds 1925
84 Siemens & Halske Stock Corp. 6 1/2% Twenty Five Year Sinking Fund Gold Debenture 1926
85 Siemens & Halske Stock Corp. 6% Participating Debenture Series A 1930