Datasets

German 10-Year Real Yield (Inflation-Linked Bund, Constant Maturity)

Kevin Patrick Lim

• 1 min read

Methodology: Estimating the German 10-Year Real Yield (Inflation-Linked Bund, Constant Maturity)

This analysis generates a time series for the German 10-Year Real Yield, which represents the market-based return on German inflation-linked government bonds (Bunds) over a fixed 10-year period. The goal is to approximate the real yield curve by normalizing inflation-linked bond yields to a consistent maturity point using publicly accessible bond pricing data and macroeconomic information.

Objective

The objective is to determine the actual (inflation-adjusted) yield of German government bonds with a 10-year maturity by:

  • Calculating the yield-to-maturity (YTM) for inflation-linked bonds (similar to U.S. TIPS).
  • Interpolating these yields to obtain a consistent maturity of 10 years.

The resulting time series reflects the real interest rate priced by the market, offering insight into long-term inflation-adjusted return expectations.

Data Inputs

The following datasets and sources were used:

• German Inflation-Linked Government Bonds: Pricing and metadata, including coupon rates, maturity dates, and market prices, sourced from the Deutsche Finanzagentur.

Methodology Overview

1. Bond Data Preparation

Inflation-linked German government bonds were filtered to include only those with valid, positive prices and non-zero coupon payments. To ensure consistency, only the most recent version of each bond per trading day was retained.

2. Yield-to-Maturity (YTM) Calculation

An approximate yield-to-maturity formula was used to estimate the actual yield for each inflation-linked bond, considering the bond’s market price, coupon, and the remaining time until maturity.

3. Interpolation to 10-Year Maturity

Since bonds usually don’t mature precisely at 10 years, yields were interpolated linearly between the two closest maturities—one shorter and one longer than 10 years. This process was repeated daily to create a constant-maturity real yield that precisely matures at 10 years.