Government launches new savings bond

 In Bonds and Gilts, News

The Portuguese Government via its debt and treasury management agency IGCP has launched new Value Savings Treasury Certificates or CTPVs.

The general public can subscribe to them as of today (Monday 13 September 2021). Unlike other savings bonds, the new State savings product offers a much lower return and the bonus on maturity is also lower.
In the medium term, the new bonds pay 1% over the seven years to maturity. But in order to get that, the bonds have to be held until maturity. If they are cashed in earlier, the amount is less.
The CTPV pays 0.7% in the first two years, and the rate rises to 0.8%, 0.9%, and 1% in the following years.
In the sixth and final years the bonds offer a dividend of 1.3% and 1.6%.
Another factor to be taken into consideration is the gross tax which has to be discounted to which the bonus is added from the third year. This bonus corresponds to 20% of the average growth of the economy with a maximum limit of 1.5%.
If a small investor invests €1000, without factoring in the bonus, they will get €70 in seven years (in gross terms).
The Government cut the interest rates on these new treasuries to take market conditions into account.
The EU’s intervention via the European Central Bank to deal with the economic fallout from the pandemic has driven down interest rates and will continue to do so until the economic stimuli end.
Looking at the effect of ECB manipulation on Portuguese public debt interest rates, bonds up to 9 years are trading at negative interest rates. This means investors are paying to hold Portuguese sovereign debt, with no alternatives on the market.