Buying bonds in Germany: exchanges, accrued interest and costs

What you will learn

• Where private investors in Germany can buy single bonds and what the order screen shows
• How clean price, accrued interest (Stückzinsen) and the dirty price fit together
• How denominations, spreads and order fees change the yield you actually earn
• A simple rule of thumb to compare costs across bonds with different maturities

Explanation

Brokers, order types and best execution are covered in the trading and order-book courses; here they are applied to single bonds.

Where bonds trade

Most bond trading happens over the counter (OTC), directly between banks and dealers. Private investors in Germany usually buy through their broker in two ways:

• Stock exchanges such as the Frankfurt and Stuttgart exchanges, where specialists or market makers quote bid and ask prices for many government and corporate bonds during trading hours.
• Direct trading (Direkthandel) with a bank or market maker chosen by your broker. You receive a binding quote for a few seconds and accept or reject it.

Before ordering, check the bond's ISIN (International Securities Identification Number), the venues your broker offers and the quoted volume.

How bond prices are quoted

Bonds are quoted in percent of the nominal value (also called face value or par). A quote of 98.40 means you pay 98.40% of the nominal amount. You do not buy a number of pieces as with shares; you buy a nominal amount, for example €10,000.

The minimum denomination (Mindestanlage or Stückelung) is the smallest nominal amount you can trade. Many retail corporate bonds have €1,000 denominations; many institutional ones have €100,000, which rules them out for a €5,000 order.

Clean price, accrued interest and dirty price

The quoted price is the clean price: it does not include interest that has built up since the last coupon payment. That built-up interest is called accrued interest (in German: Stückzinsen). The buyer pays it to the seller and then receives the full next coupon, so both sides get their fair share.

The amount you actually pay is the dirty price (invoice price):

Dirty price = clean price + accrued interest

Accrued interest = nominal × coupon rate × days accrued ÷ days in the coupon period

The day-count convention is the method of counting days. Euro government bonds and most euro corporate bonds use ACT/ACT (actual days ÷ actual days in the period). Interest usually accrues from the last coupon date up to the day before the settlement date, the day when cash and bonds are exchanged. For exchange trades in the EU, settlement is currently two business days after the trade (T+2); the EU plans to move to T+1 in October 2027, so check the current rule.

Costs

Three costs matter: the broker's order fee, possible exchange or venue fees, and the bid-ask spread. Spreads are usually narrow for large government bonds and wider for small or rarely traded corporate bonds. Because yields are only a few percent per year, small fees matter, especially on short maturities.

Rule of thumb: yield drag per year ≈ total buying cost in % ÷ remaining years to maturity. If you sell before maturity, add the selling cost.

Tax note (Germany, general orientation): accrued interest you pay is generally treated as negative capital income, and accrued interest you receive when selling is taxable. Check details with a Steuerberater.

Worked example

Hypothetical example: You buy a nominal €10,000 of a federal bond with a 2.50% annual coupon. The last coupon was paid on 15 August. Settlement is on 15 October. The ask (clean) price is 98.40, the broker charges a flat €9.90 and there is no extra venue fee. The coupon period has 365 days.

1. Clean value: €10,000 × 98.40% = €9,840.00.
2. Days accrued (15 August up to 14 October): 17 + 30 + 14 = 61 days.
3. Accrued interest: €10,000 × 2.50% × 61 ÷ 365 = €41.78.
4. Total payment: €9,840.00 + €41.78 + €9.90 = €9,891.68.

At the next coupon date you receive €250; €41.78 of it simply returns the accrued interest you paid.

The same flat fee costs the small order five times more. Excluded: spreads, taxes, custody fees.

Common mistake

Practice activity

You buy a nominal €5,000 of a corporate bond with a 3.00% annual coupon. Last coupon: 1 March. Settlement: 1 July. Clean price: 101.20. Fee: €7.50. Assume ACT/ACT with 365 days in the period. Calculate (a) the clean value, (b) the accrued interest and (c) the total amount debited.

Key takeaways

• Bonds are quoted in percent of nominal value; you buy a nominal amount, subject to the minimum denomination.
• You pay the dirty price: clean price plus accrued interest, which you get back with the next coupon.
• Order fees and spreads hurt most on small orders and short maturities; divide cost by remaining years to see the yield drag.
• Check ISIN, venue, quoted volume and denomination before placing a limit order.

Next step

Next, you will use this knowledge to build a bond ladder and see what holding to maturity really protects you from.