More bonds in the pipeline

The Finance Ministry yesterday said it plans to go ahead with two more offerings of popular savings bonds this year despite the fact that only 80 percent of a 1-billion-euro issue opened for subscription last week was taken up by retail investors. According to the Public Debt Management Agency, 86,251 valid applications were made for 803.96 million euros in popular savings bonds. There were 1,400 invalid applications while 59 bids were received from abroad for 546,000 euros’ worth of bonds. The 80 percent take-up rate underscores retail investors’ interest in government paper and «constitutes one of the biggest state offerings in recent years,» Economy and Finance Minister Nikos Christodoulakis said yesterday. «We will be launching two more issues as planned in May and September, worth 800 million euros each,» he said. The interest rate for the two offerings is expected to remain unchanged at 3.6 percent, the same coupon for the first issue. The interest rate is half a percentage point above the January inflation rate and 0.9 percentage points over the yield of one-year government paper that came to maturity last month. The government has marketed the tax-free popular savings bonds as a move to help retail investors offset the negative yield on bank deposits. Investors redeeming the paper before maturity will be faced with a 10 percent withholding tax. Local banks, however, have criticized the move, calling it spasmodic intervention by the State. The International Monetary Fund has been equally blunt. In its country report on Greece released early this month, it said that «plans to provide above-market rates of return on popular savings bonds run counter to the general direction toward market-oriented reforms.»

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