The Slovenian Ministry of Finance announced it would issue bonds for citizens, following a solid example from Croatia, which resulted in strong oversubscription of the same type or product. The volume of the issuance is expected at c. EUR 250m. The interest rate will be determined before the announcement of the call for bids for the bond subscription. Interest up to EUR 1,000 will not be taxed.
Last week, the Slovenian Ministry of Finance announced it will issue bonds for citizens. The goal of this issuance is to educate and inform the general public about safe investment opportunities with an emphasis on savings, as well as the revival of the capital market with new instruments. The volume of the issuance is expected around EUR 250m.
For comparison, Croatian government was very active in promoting debt capital market in 2023. In March it issued EUR 1.8bn of local 2-year bonds out of which EUR 1.3bn was allocated to retail at 3.65% YTM. And, again in November government issued EUR 715m of treasury bill allocated to retail.
When looking at pricing of the Slovenian retail bond, first the maturity for bond has to be determined, but it is expected that it will be between 2 and 5 years. The interest rate will be determined before the announcement of the call for bids for the bond subscription, on the basis of the extrapolation of the yield curve of treasury bills and with the markup of the tentative premium for the new issue. Croatian 10Y government bond is currently priced at 38 bp above Slovenian government bond. When looking at Slovenian yield curve we can say that Slovenian bonds could be priced around 3%, when looking at suggested maturities.
Slovenian Government Bonds yield curve
Source: Bloomberg, InterCapital Research
The minimum subscription amount will be EUR 1,000 and the maximum amount will be EUR 100k, whereby in case of oversubscription, the number of bonds that will be allocated to an individual investor may be less than the subscribed amount, but not less than EUR 1,000, which is a minimal subscription amount. Finally, taxes will be equated with the treatment of interest from cash deposits at banks and savings banks, meaning that interest up to EUR 1,000 will not be taxed, while the amount above that will be taxed at 25%. For comparison, interest on Croatian national bonds are not taxed at all, as they are treated as interest from cash deposits at banks and savings account. However, let’s not forget the scenario where an investor does not hold the bond until maturity (sells it on the stock exchange) – investor would pay a capital gain tax, if one existed in the first place. Slovenian capital gain tax amounts to 2% in this case. According to the unofficial data, the main organizers will be NLB and Nova KMB, while investors should be able to submit offers at other brokerage companies too. Finally, bonds will be listed on the LJSE for the time of duration.
As stated by the Slovenian Ministry of Finance, issuance was already planned last year but was delayed due to a few circumstances like the inflows from the Recovery and Resilience Mechanism, the level of liquid budget assets, the achievement of the target level of government sector debt and other.