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Estonia to offer bonds to residents

For the first time this year, the Estonian government plans to issue bonds for the country’s residents, which would bear a fixed interest and be traded on the Tallinn Stock Exchange.

“We have been selling government bonds to professional investors and international funds for several years, and now, on the advice of economic experts and following the example of several European countries, we intend to make them available also to local small investors, to all people of Estonia,” Finance Minister Mart Võrklaev said in a press release on Wednesday.

He said the move would expand the choice of financing sources for the government, while offering investors a low-risk instrument of high liquidity.

“We see that government bonds would help invigorate the local capital market, attract new participants to the securities market, and promote financial literacy. In the broader picture, strengthen the state and stimulate the economy, as the interest income will remain in Estonia,” the minister said.

Janno Luurmees, head of the treasury department at the Ministry of Finance, noted that the necessary framework document for issuing such bonds has been completed. Depending on developments in the financial markets, the plan is to carry out the first bond issue later this year.

“Different experts have estimated the demand of Estonian small investors for such bonds to be from a few tens to a few hundred million euros,” said Luurmees.

The exact terms and conditions of the issue targeted at Estonian retail investors — the period and volume of the public retail offering, the fixed interest rate of the bonds, their term to maturity and nominal value — will be announced immediately before the start of the subscription. Estonia has contracted LHV Pank and Swedbank as transaction managers. The legal advisor for the transaction is the law firm Sorainen.

A government bond is a security issued by the government, which is repaid on a specified maturity date along with a predetermined amount of interest. Interest payments are typically made once a year on a specific date. Those who wish to subscribe for the bonds need a securities account, which can be opened at their home bank. The Estonian retail bond will be freely tradable and listed on the Nasdaq Tallinn Stock Exchange.

In recent years, several countries of Europe, including Belgium, Croatia, Ireland, Italy, Latvia, Lithuania, Portugal, Romania and the United Kingdom, have issued government bonds aimed at retail investors, although the bonds have not always been exchange-traded. The maturities of the bonds have ranged from one month to ten years. Since a government bond is one of the lowest-risk financial instruments, their availability has brought new small investors to the securities market.

Estonia has been active in issuing both long-term and short-term bonds since the beginning of the COVID-19 crisis in 2020. At the end of May, investors had four billion euros of long-term and 1.1 billion euros of short-term Estonian government bonds in their portfolios. These bonds have been mainly targeted at professional investors and international funds.

Estonia’s debt burden is among the lowest in the EU. The government debt of Estonia in 2023 stood at 7.3 billion euros, or 19.6 percent of gross domestic product (GDP).

The deposits of Estonian households amounted to a record 12.3 billion euros in May this year, with term deposits accounting for over four billion euros of the total.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)


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