Germany: No need so far to adjust debt for Greece

LONDON (Reuters) - There are no signs Germany will need to issue more debt on account of fiscal problems facing Greece, the head of the German debt management agency told Reuters on Wednesday.

The German government has said it has no concrete plans to give aid to Greece, but officials in Chancellor Angela Merkel's ruling coalition in private has conceded that contingency plans have been drawn up should Athens be unable to service its debt.

"It depends on what kind of solution the euro zone members find for the (Greek) problem. As of today, I have no signal that there will be any need for adjusting our issuance calendar," Carl Heinz Daube, managing director of the German Finance Agency, told Reuters in a telephone interview from Frankfurt.

Daube said support for euro zone countries would likely consist of disciplinary and stability measures, which may comprise liquidity measures akin to Germany's Financial Stability Fund and similar plans used in France and the UK.

LOWER YIELDS NOT A CONCERN

Germany plans to issue a total of 175 billion euros of bonds and treasury bills by end-June, and Daube said that, overall, he saw no change to Germany's debt issuance plans through mid-year.

Concerns about how Greece will service its ballooning debts have triggered risk aversion in past months, sending investors into German debt, widely considered the safest in the euro zone.

As a result, German government bond yields have been on a falling trend since January.

The yield on 10-year German debt bumped down to around 3.10 percent earlier this month, pulling back from levels above 3.40 percent touched at the start of the year. On Wednesday, they were at 3.13 percent.

A fall below 3.09 percent would be the lowest in nearly a year.

The two-year yield hit a euro lifetime low of 0.888 percent on Wednesday.

Despite the move, Daube said he was not concerned that overseas investors may shift away from German debt to higher-yielding bonds in France or other euro zone countries.

German yields have fallen faster than French ones, pinching the spread between 10-year benchmark yields since the start of the month. It was at around 28 basis points on Wednesday, narrowing from around 38 basis points earlier this month, their widest since summer.

Demand for German bonds would remain buoyant given their safe-haven status and the high liquidity in the market, he said.

"I'm not concerned. Investors have a preference, albeit small, for German bonds over French bonds ... Germany is the benchmark for the market, not France," Daube said.

Responding to demand for inflation-linked debt as price pressures are seen rising in the future, Germany plans to issue 3-4 billion euros in inflation-linked bonds each quarter this year.

Germany issued around 2 billion euros' worth of 2020 linkers in January and Daube said he would not be surprised if market conditions allowed Germany to issue its first 30-year linkers before mid-year.

"I wouldn't be surprised if we were able to issue more before the summer break," Daube said. "Perhaps there will be a window in March, maybe in June."

He said the agency had the flexibility to adjust the amount of linkers on offer each quarter.

(Reporting by Naomi Tajitsu, editing by Nigel Stephenson)