Estonia issues negative interest rate short-term bonds worth €200 million

Euros (picture is illustrative).
Euros (picture is illustrative). Source: Siim Lõvi/ERR

The Estonian Ministry of Finance has issued short-term bonds worth €200 million, as part of its package of measures to counter the economic effects of the coronavirus pandemic. The bonds were issued Monday, and carry a negative interest rate.

Nation states can raise money for public spending by issuing government, or soverign, bonds, which is what the Estonian government has opted to do here.

In total, the ministry auctioned 2,000 bonds, with a nominal value of €100,000 each. The average yield on maturity of bond issued was -0.296 percent, i.e. a negative rate. The highest interest rate at which bonds stood at was -0.2 percent.

The negative interest rate means purchasers will pay Estonia for the money the country has borrowed by issuing the bond.

The bond issue is part of the government's response to the economic crisis caused by the effects of the coronavirus (COVID-19) pandemic. Further detailed plans are currently being drawn up, although Prime Minister Jüri Ratas (Center) announced a €2 billion package of measures last week.

Borrowing €200 million is the first stage of the government's bond issue strategy and there are also plans to issue further short-term bonds. The Ministry of Finance is also preparing to issue long-term bonds, possibly in the summer.

The first round of issuing on March 23 for €200 million was auctioned in two types, of six and 12 months. A total of four dealers submitted bids, with no issuing for the six-month bonds. More information is on the finance ministry's website here.


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Editor: Helen Wright, Andrew Whyte

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