Running Yield Reaches Yet Another Record

Frankfurter Börse; Umlaufrendite

Photo by Christian Barmala / CC BY

A new record has been set. The German running yield, described as the index of fixed interest securities has descended to 0.02%, a level that has never been reached before. Only days before, on February 24, 2016 the previous record low of 0.04% had made the news.

Last year already, the running yield displayed considerable fluctuations having reached 0.05% early that year before it temporarily recovered to 0.08% in mid-2015. Since this short recovery the market observed a steady decline of the interest. It remains to be seen whether this year’s leap day marks the final low point of the interest rate’s decline or whether further lows will follow.

European Bank will influence future of interest level

While this development will certainly please German Federal Minister of Finance, Wolfgang Schäuble and other debtors, savers and depositors, on the other habd, are more likely to become nervous. They will receive continuously decreasing interest on their deposits, if anything still. The coming session of the European Central Bank (EZB) in Frankfurt on March 10 will shed some light on its plans to implement measures against low inflation. This could mean a continuation of the low-interest phase.

PONS Atlantic Partners is a consulting firm based in Berlin. Two decades ago we started to focus on site selection advisory and M&A advisory within the USA. We expanded our business activity to real estate consulting and therefore founded Pons Real Estate. Our team has long experience in the American-German economic and trade relation. We know both markets and all their characteristics. Our experts bring analytical skill and specific knowledge about the financial, legal, structural, political and cultural situation in Germany and the US.

German Running Yield Dropped to Historic Low

European Central Bank

Photo by Andrea Sartorati / CC BY

At 0.04%, the German running yield reached a new record low on February 24, 2016. The last time the German running yield reached a historic low was in April, 2015 with 0.05% lasting for only three days. After a short boost to 0.08% in July, 2015 the descent continued constantly and finally culminated in the historic all-time low.

Low Running Yield a Reason to Act

Depositors receive even less interests than before. To find alternative investment strategies is complicated but possible, depending on your personal preferences. The German real estate market offers a wide range of investment opportunities and the German capital, Berlin, is of high interest to national and international investors. Thanks to an ongoing positive net migration and 30 million visitors per year the German real estate market is booming and promises attractive returns.

The running yield is the annual income on an investment divided by its current market value. Running yield is a calculation that takes the income from dividends (for stocks) or coupons (for bonds) and divides the income by the market price of the security; the value is expressed as a percentage. A security’s running yield is sometimes used by investors to make buying and selling decisions and investors can use running yields to compare the expected lifetime income yield of various securities.

PONS Atlantic Partners is a consulting firm based in Berlin. Two decades ago we started to focus on site selection advisory and M&A advisory within the USA. We expanded our business activity to real estate consulting and therefore founded Pons Real Estate. Our team has long experience in the American-German economic and trade relation. We know both markets and all their characteristics. Our experts bring analytical skill and specific knowledge about the financial, legal, structural, political and cultural situation in Germany and the US.

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