Slovakia will relaunch its retail government bond programme in March, offering two new bond issues to individual investors with lower yields than last year, the Finance Ministry has said.
The state plans to sell up to EUR 400 million worth of bonds, with the option to increase the total to EUR 500 million if demand is strong. The programme follows last year’s retail bond sale, which was sold out within days and drew heavy interest from older savers.
The new offering will include two bonds: a two-year bond called Investor II and a four-year bond called Patriot II, each with a planned volume of EUR 200 million. The minimum investment will be EUR 1,000, with investors able to buy bonds in multiples of that amount.
The two-year bond will offer an annual coupon of 2.7%, while the four-year bond will pay 3.0%. Both yields are 0.3%age points lower than those offered in last year’s retail bond issue.
Finance Minister Ladislav Kamenicky said the lower yield reflected changes in financial markets. Peter Soltys, the newly appointed head of Slovakia’s debt management agency ARDAL, said the European Central Bank had cut its key interest rates by 1%, while bond yields on secondary markets had fallen by about 0.3%.
“Retail bonds are aimed primarily at conservative savers but may also appeal to more experienced investors seeking stable returns,” Soltys said.
Sales will run from March 2 to March 20, through Slovakia’s five largest banks: Slovenska sporitelna, VUB, Tatra banka, CSOB and UniCredit Bank. If demand exceeds expectations, the state may issue an additional EUR 100 million, as it did last year.
Last year’s retail bond sale totalled EUR 500 million, with most buyers aged over 65. Investors who put more than EUR 100,000 into the bonds accounted for about a quarter of total demand.
The bonds are exempt from income tax, making their effective yield higher than most bank term deposits, which are taxed. Analysts have said the state is borrowing at a higher cost through retail bonds than on wholesale markets, but the programme helps diversify funding and mobilise household savings.
Kamenicky said the government was working on an online sales platform that would allow citizens to buy bonds directly in the future, but the current bank-based system would remain in place at least until 2028. (The Slovak Spectator)