Last Wednesday, Estonia started offering its citizens to buy bonds. Unlike Latvia, where since 2013 the state has always been giving citizens the opportunity to buy savings bonds for different terms (with interest rates changing accordingly), in the neighboring country this is a one-time event (until September 9) in which citizens have the opportunity to buy two-year government bonds with a interest rate 3.3%. The total offer includes two million bonds with a value of EUR 200 million. In Estonia, such bonds are a long-awaited step in the financial markets.
The interest rates for time deposits in Estonia’s largest banks are quite similar. For a two-year euro term deposit Swedbank, LHV and SEB Bank offers a rate of 2.5%, while the rate for a one-year deposit is 3.5%. There is an exception Luminor a bank that offers a two-year term deposit at 2% and a one-year deposit at 3.3%.
Different nuances
“Estonian savings bonds will be traded on the Nasdaq Tallinn stock exchange, but in the case of Latvia, stock exchange trading does not take place, there is a possibility to redeem savings bonds before the due date, which is an alternative solution for trading,” says Egils Kaužēns, economist of the Bank of Latvia. Compared to time deposits and Latvian savings bonds, Estonian government bonds have the advantage of being able to sell them later on the secondary market. However, one cannot know how liquid Estonian bonds will be. And the secondary market price is not guaranteed. For example, in the case of term deposits, if people need to access their money before maturity, they usually lose interest by withdrawing the money early. But the interest on Estonian bonds will be calculated for the period in which the bond will be held. However, as the data show, government bonds listed on the Riga and Vilnius stock exchanges are quite illiquid – transactions do not take place on the secondary market, and the investors who bought them mostly keep them in their possession until their repayment term.
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2024-09-07 04:41:31