Finance ministry confirms plan to offer bonds to small investors

For the first time, the state plans to issue bonds aimed at the Estonian people, which will offer small investors a fixed interest rate and the opportunity to trade on the Tallinn Stock Exchange, the Ministry of Finance said on Wednesday.
"We've been selling government bonds to professional investors and international funds for several years and now, on the recommendation of economic experts and following the example of several European countries, we intend to make them available to local small investors, to all Estonian people," said Minister of Finance Mart Võrklaev (Reform) in a statement.
"For the state, this means expanding the selection of sources of funding, but for investors, it means a more liquid instrument in addition to low-risk and fixed-term deposits. We see that government bonds would help boost the local capital market, bring new people to the securities market and promote money wisdom, strengthen the country and boost the economy on a broader scale, as the interest income will remain in Estonia," he said.

Janno Luurmees, head of the State Treasury Department of the Ministry of Finance, said that the necessary framework has been prepared and the first issue is planned for this year.
"Various experts have estimated the demand for such bonds from small investors in Estonia at between a few tens and a few hundreds of millions of euros," Luurmees says. "The money raised will be channeled into the national budget, including to cover increased national defense and other investments."
The exact rules of the issue aimed at Estonian retail investors – the subscription period and volume of the public retail offer, the fixed interest rate and the maturity and nominal value of the bond – will be announced shortly before the start of the subscription. The Estonian state has chosen AS LHV Pank and Swedbank AS to organise the transaction. The legal advisor of the transaction is Law Firm Sorainen.
A government bond is a security issued by a government that is redeemable on a specified maturity date with a specified amount of promised interest. As a rule, interest is paid out once a year on a specific date. It is necessary to have a securities account in order to subscribe for the bonds, i.e. acquire the right to purchase the security, which everyone can open in their home bank. The bond will be freely tradable; it will be listed on Nasdaq Tallinn where it can be bought and sold on the secondary market.

Over the past few years, several European countries (including Belgium, Croatia, Ireland, Italy, Latvia, Lithuania, Portugal, Romania, and the UK) have issued government bonds aimed at retail investors on various scales, although the bonds have not always been exchange-traded. The term of the bonds has ranged from one month to ten years. As the government bond is one of the lowest-risk financial instruments, it has also brought new small investors to the securities market.
Estonia has been more 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, there were €4 billions' worth of long-term and €1.1 billions' worth of short-term Estonian government bonds in the portfolios of investors. These bonds have mainly been aimed at professional investors and international funds.
Estonia has one of the lowest loan burdens among all countries in the European Union – the loan burden of the Estonian state in 2023 was €7.3 billion, i.e. 19.6% of GDP. Estonian household deposits reached a record €12.3 billion this May, with more than four billion euros in term deposits.
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Editor: Helen Wright