The Federal Debt Agency reports that a total of 402.5 million euro has been raised through the latest state bonds issue. The 1-year bond raised more than 380 million euro with almost 20 million euro being invested in the 10-year bond. The amount raised is less than expected.
The 1-year bond offers a net return of 1.93% This is considerably lower than the net interest rate of 2.81% that was offered to investors when the Federal Debt Agency released 1-year bonds last year. Then a record 22 billion euro was raised. The net interest on last year’s 1-year bond was higher thanks to a one-off reduction in the withholding tax levied on the interest accrued by those investing in the bonds. As well as raising money to help finance public debt, the aim of last year’s bonds release was to get the banks to increase the interest they offer to savers.
This year no reduction of withholding tax was on offer and the banks have also increased the interest they offer on savings accounts.
The 10-year-bond has an annual interest rate of 2.80%.
Lower than expected
The bonds release has raised a total of 402.5 million euro. The 1-year bond raised 382,7 million euro, while the 10-year bond raised 19.8 million euro. The amount raised is lower than expected.
Therefore, the Federal Debt Agency will increase the outstanding amount of Treasury bills by 15 billion euro this year rather than the planned 12 billion euro. Treasury bills are another way for the Federal Debt Agency to borrow money short-term basis on institutional investment market.