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The state plans to offer bonds to the people of Estonia (2)

Государство планирует предложить облигации народу Эстонии (2)

The Estonian state plans to issue bonds aimed at the country's population for the first time this year, offering small investors a fixed interest rate and the opportunity to trade on the Tallinn Stock Exchange. Stock Exchange. Stock Exchange. Photo: Mihkel Maripuu

The Estonian state plans to issue bonds aimed at the country's population for the first time this year, offering small investors a fixed interest rate and the opportunity to trade on the Tallinn Stock Exchange.

“We have been selling government bonds to professional investors and international funds for several years now, now, on the recommendation of expert economists and following the example of a number of European countries, we intend to make them available to local small investors, to the entire population of Estonia,” said Estonian Finance Minister Mart Vyrklaev.

“For the state, an expansion of the range of funding sources, and for investors, a low-risk and time deposit is a more liquid instrument than before. We see that government bonds will help revitalize the local capital market, attract new people to the securities market and promote financial wisdom, and overall strengthen the country and stimulate the economy, as interest income remains in Estonia,” he added.

The necessary framework document for issuing such a bond has already been prepared, and depending on developments in the financial markets, it is planned to achieve the first issue this year, said the head of the State Treasury of the Ministry of Finance, Janno Luurmees said.

“Various experts predict the demand of small investors in Estonia for such bonds from several tens to several hundred million euros. The money raised will be directed to the state budget, including to cover increased spending on national defense and other investments,” said Janno Luurmees.

The exact terms of the issue, aimed at Estonian retail investors – subscription period and volume of public retail supply, fixed interest rate, term and nominal value of the bonds – will be disclosed immediately before the start of the subscription. The Estonian state hired AS LHV Pank and Swedbank AS as transaction managers. The legal firm Sorainen acted as a legal consultant for the transaction.

A government bond is a security issued by the government that is redeemed on a specified maturity date with a specified amount of interest allowed. Typically, interest payments are made once a year on a specified date.

To subscribe to bonds, that is, to obtain the right to purchase a security, you need a securities account, which can be opened at your home bank. The bond will be freely tradable and will be listed on the Nasdaq Tallinn stock exchange, where it can be bought and sold on the secondary market.

In recent years, a number of European countries, including Belgium, Croatia, Ireland, Italy, Latvia, Lithuania, Portugal, Romania and the UK, have issued various bonds to retail investors, although these bonds have not always been publicly listed. The duration of the bonds varied from one month to ten years. Since government bonds are one of the least risky financial instruments, they have also attracted new small investors to the securities market.

Since the start of the Covid-19 crisis in 2020, the Estonian state has become more active in issuing both long-term and short-term bonds. As of the end of May, investors' portfolios include long-term Estonian government bonds worth EUR 4 billion and short-term Estonian government bonds worth EUR 1.1 billion. These bonds are aimed primarily at professional investors and international funds.

Estonia is one of the countries with the lowest debt burden in the EU – the debt burden of the Estonian state in 2023 amounted to 7.3 billion euros, or 19.6 percent of GDP. The volume of deposits of Estonian households in May this year reached a record 12.3 billion euros, with time deposits amounting to more than four billion euros.

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