Government bonds are not debt instruments, they're monetary policy instruments (in the words of JakeS).

The Central Bank needs a sufficient stock of government bonds to be able to set rates.

Limiting the amount of government debt outstanding to (say) 60% GDP or the rate of issue to (say) 3% per year works is bonkers. In normal times, it doesn't much matter.

But what FT Alphaville is saying is that the Bundesbank effectively needs a lot more Bunds in hand than the Federal Government can issue.

(Others may interpret this differently)

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

Another key point in the FT Alphaville story:

[manipulating interest rates is like manipulating exchange rates] Except that while there is in theory no limit on repurchases, there is a limit to raising rates if your reserve stock runs out. This is why some central banks operate so called phantom bond facilities which temporarily issue phantom bonds into the market to ensure rates could never in theory be restricted due to a shortage of central bank-held bonds.

The Bundesbank, however, does not have a phantom facility. As we have noted, it instead habitually retains float from auctions to build up buffers it can then release into the market when needed for rate setting purposes.

In other words, FTA claims that usually Central Banks can sell bonds short into the bond market, but peculiarly the Bundesbank sells from actual bond stock which is "reserved" out of each issue for that purpose.

I still need to get my head around that.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis