Government puts breaks on national savings bonds
The Government is to suspend issuing national savings bonds for families temporarily because of negative interest rates in the market.
The issue of Variable Rate Treasury Bonds (Obrigações de Rendimento Variável), the latest savings product from the state aimed at families is still in the Treasury & Public Debt Management Agency’s plans (IGCP), but are unlikely to be issued this year.
With interest rates on Portuguese public debt below zero, the agency run by Cristina Casalinho cannot provide sufficient interest to pay dividends out to small investors buying these savings bonds. On the contrary, the IGCP would have to pay commission.
The interest on Portuguese sovereign debt at 10 years has wavered between 0.268 and 0.340 over the past month while this year they hit a record low of 0.15% for the first time in August 2019.
“A new OTRV is planned for the Financing Programme for 2019,” states the IGCP. It is in fact in the presentation to investors which is posted on the agency’s site where the issue amount advertised is for €1Bn to be “issued”.
However, “At the moment there is no scheduled date for their issuance,” states the IGCP.
According to the online news agency ECO, the IGCP is prepared to not advance with the issue this year bearing in mind the historically low interest rates on national debt in the international markets.
The rate on 10 year bonds is at 0.20% — a level that has never been seen before. “We have seen a growing number of bond issues at different maturity dates selling at negative interest rates,” states the IGCP.
In other words, with such low interest rates in the market, investor interest in savings bonds has all but disappeared.