The Ministry of Finance is planning to issue up to €200 million worth of bonds for Estonian retail investors with a maturity of up to five years. The interest would be based on the market and they would be listed on the Tallinn Stock Exchange.
Janno Luurmees, head of State Treasury Department at the Ministry of Finance, said the plans are in place but the details have not yet been finalized.
The volume is also still under discussion. “We have consulted with various local market players and experts, there are opinions from a few tens of millions to a few hundred millions, so I think a maximum of a couple of hundred million,” Luurmees said.
Luurmees said the maturity of the bonds could be between one and five years.
“Feedback from different parties is that if we are targeting retail investors, it is the shorter term that is more likely to attract retail investors,” Luurmees said.
The offered interest rate will be based on market conditions. “We are certainly looking at alternative financing options so that we don’t overpay and impose additional costs on the state in the form of higher interest rates, but it’s difficult to say the exact rate, it depends on the market,” he said.
Luurmees added that, in general, the interest rate could remain comparable to the 12-month Euribor, which is currently 3.576 percent per year.
The bonds would be tradable on the Tallinn stock exchange. “This will make them more accessible to local retail investors and transaction fees cheaper,” he said.
In addition to Estonian retail investors, the state treasury plans to roll over €300 million of one-year short-term bonds aimed at institutional investors in the fall, but Luurmees said no other large-scale issues are planned this year. There is no need.
In general, after the European Parliament elections, uncertainty has arisen in the European bond markets, Luurmees said, mainly in connection with the victory of right-wing populists in France and President Emmanuel Macron’s decision to hold early parliamentary elections.
“The likelihood that more extreme views will come to power certainly creates such uncertainty among investors,” Luurmees said. “Low-risk countries may have suffered less and higher-risk countries a little more.”
However, some national issues have also taken place after the European Parliament elections, for example in Lithuania and Finland.
Estonia’s three long-term bond issues are all listed on Ireland’s Euronext Dublin stock exchange – €1.5 billion issued in June 2020 with an interest rate of 0.125 at the time, €1.5 billion issued in October 2022 with an interest rate of 4.0 percent and €1 billion issued in January of this year, with interest 3.25 percent.
All have 10-year maturities and are currently trading at around 3.6 percent. Estonian investors can also buy them, but the nominal size of one bond is 1,000 euros and their acquisition is accompanied by relatively high service fees.
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