The European Central Bank has published research in its June 2026 review of the international role of the euro finding that foreign demand for the euro area’s benchmark safe asset, proxied by German government bonds, has strengthened in recent years, but the euro’s role as a reserve and safe-asset currency remains constrained by the limited and fragmented supply of highly rated euro-denominated sovereign debt. It estimates that the foreign convenience yield on German government bonds rose from almost 60 basis points in 2023 to around 90 basis points in 2025, with about 85% of that benefit reflecting exposure to the euro rather than safety and liquidity alone. The analysis says the gap between the US Treasury basis and the euro government basis has narrowed, but the United States still retains a much larger convenience yield. Foreign investors were estimated to earn around 190 basis points of convenience yield on US Treasuries in 2025, with roughly 170 basis points linked to dollar exposure. The paper also notes that the euro’s share of global foreign exchange reserves is only slightly above the euro area’s share of global GDP, while the US dollar accounts for almost 60% of reserves despite the United States representing about a quarter of global GDP. Market size is presented as a key driver of convenience yields. US Treasuries exceed USD 31 trillion outstanding, while sovereign debt issued in the EU and rated A or above totals about USD 11 trillion, only about half of which is rated AA or above. German government bonds account for almost USD 2.2 trillion and joint EU bonds about USD 1.2 trillion, but issuance remains spread across multiple issuers and time-limited programmes, which reduces liquidity and benchmark status. In that context, the research notes that the EU has agreed to issue bonds from 2026 for EUR 90 billion of Ukraine support and EUR 150 billion of defence spending, and has proposed EUR 133 billion of Catalyst Europe loans and EUR 350 billion of Crisis Mechanism loans for 2028-2034. At the same time, bonds issued under the COVID-19 programmes are expected to start maturing from 2028 without rollover. The paper concludes that a genuine highly rated European safe asset could ease these constraints and strengthen the euro’s international reserve role.
European Central Bank2026-06-02
European Central Bank research finds foreign convenience yield on German government bonds rose to around 90 basis points while euro safe asset supply remains constrained
The European Central Bank’s June 2026 review finds that foreign demand for the euro area’s benchmark safe asset, proxied by German government bonds, has increased, with the foreign convenience yield rising from almost 60 basis points in 2023 to around 90 basis points in 2025. However, the euro’s reserve and safe-asset role remains constrained by the limited and fragmented supply of highly rated euro-denominated sovereign debt, as US Treasuries still benefit from a significantly deeper, more unified market. The paper notes upcoming and proposed European Union bond issuance for Ukraine support, defence and crisis instruments, and concludes that a genuine highly rated European safe asset could bolster the euro’s international reserve role.