Estonian govt bonds oversubscribed fourfold

Photo: Sander Ilvest

The total demand for the offer of Estonian government bonds reached 821 million euros, meaning the offer was oversubscribed more than four times, while all Estonian retail investors will receive the desired amount of bonds.

Estonian retail investors are allocated 100 percent, Estonian professional investors an average of 26 percent and international investors an average of 13 percent of the subscribed volume.

"The offer created excitement and great interest in the market, it was talked about a lot, and almost all the region's most important players on the financial market subscribed to Estonian government bonds. As previously promised, when allocating bonds, we give preference to Estonian retail investors," Janno Luurmees, head of the treasury department of the Ministry of Finance, said. "While we have already offered bonds to professional investors several times before, we are selling bonds to retail investors for the first time -- a significant step towards creating a low-risk financial instrument has been made. The share of private individuals was as expected, and those who could not subscribe to the bonds within the offer will be able to buy them from the Tallinn stock exchange in the future."

Head of investment banking at LHV, Mihkel Torim, said that this was one of the largest issues in Estonia in recent years.

"The attractive valuation of Estonian government bonds is confirmed by the strong oversubscription of the issue, the lower than usual nominal value of the bond for the state also enabled higher involvement -- it brought along 3,350 small investors who purchased bonds worth up to 1,000 euros," Torim said.

Allan Marnot, head of the capital markets department at Swedbank, said that from now on, a low-risk instrument is available on the Estonian capital market, which was not available before.

"There was great interest in the issue throughout the Baltics and also further afield, for example, in Germany. The four-fold oversubscription ensures demand in the bond secondary market, which provides additional assurance to retail investors who purchased bonds from the issue. The issue showed that Estonians are active investors and that financial education and awareness of the importance of investing are on the rise in Estonia. Considering the population, there are more government bond investors in Estonia than in Slovenia, where 9,427 investors subscribed to three-year bonds," Marnot said.

A total of 28 professional and 7,304 retail investors participated in the public offering of Estonian government bonds, the total demand for the offer reached 821 million euros, which is 4.1 times more than the base amount of the offer. The share of retail investors reached 29 million euros, the average subscription size was 3,973 euros. 70 percent of the bond subscription volume was subscribed by Estonian investors.

Trading in Estonian government bonds on the Baltic Main List of the Nasdaq Tallinn stock exchange will begin on Sept. 17. The maturity date of the bonds is Sept. 16, 2026, when the Estonian state will repay the owner of the bond an amount corresponding to the face value of the original bond. In addition, the state pays a fixed interest of 3.3 percent per year on the bonds, the payment is made once a year.

Estonia has been active in issuing both long-term and short-term bonds since the beginning of the COVID-19 crisis in 2020. At the end of July, investors had four billion euros of long-term and 1.1 billion euros of short-term Estonian government bonds in their portfolios. These bonds have been mainly targeted at professional investors and international funds.