Written by Jörg Basseri
June 23 (Reuters) – As banks struggle to keep up with rising interest rates, euro zone savers are rushing into government bonds to secure cash returns.
Italy leads the way with record sales 18.2 billion euros It will issue retail bonds this month to increase its domestic bond holdings.
But that’s just the tip of the iceberg.
Portugal has shifted half of its funding this year to savers, Belgium expects retail bond sales to rise ninefold and Spanish savers are piling up treasury bills.
The scale of this demand has come as a surprise to debt managers and highlights the rapid return of savers to dedicated debt programs that have shown little interest in a decade.
The return marks the latest structural change since high inflation forced the European Central Bank to end negative interest rates last year and steadily raise borrowing costs.
For issuers, the influx of new buyers is a sign of confidence as the ECB trims its bond holdings.
“We thought that this move would somehow lose momentum because of the limits of savings,” said Rui Amaral, director of the Portuguese Debt Authority.
“Portugal is growing rapidly … but savings are not growing as fast as we (foresee) this continued surge in retail investment.”
Amaral said Portugal plans €3.5 billion for the full year and has already sold about €10 billion of new savings certificates to retail investors, with €4.6 billion in 2022 when demand begins to recover. , sales in 2021 were just 500 million euros.
Significantly reduced sales of bonds and treasury bills this year €8.9 billion increase It supports savings certificates, of which €12bn will be sold by the end of the year, half of its 2023 funding program of €24.8bn.
“Like other European banks, banks are not in much of a hurry to increase deposit fees. said Amaral.
This means that around 15% of Portugal’s outstanding government debt is currently held by private investors, up from 10% in recent years.
Belgium, on the other hand, issued €390 million of government bonds to retail investors this year, the highest since 2011.
That would return demand for retail bonds to levels seen in the early 2000s, Post said.
In Spain, individuals held 15% of outstanding treasury bills as of March, up from near zero since 2015 and a record high, according to Treasury data going back to 2002. It is standard.
But individuals still hold only 1% of the total public debt of 1.3 trillion euros, a spokeswoman said. Scope Ratings argues that Spain should use these investors to spread refinancing risk and control borrowing costs.
Spanish bank pays Lowest deposit interest rate among eurozone powers. A 1-year term deposit returns 1.3%, while a 12-month term deposit returns 3.7%. ES1YT=RR.
“Suddenly you realize that your money in savings is paying like peanuts, when you could get a lot more out of government bonds,” said Jorge Galayo, interest rate strategist at Societe Generale. .
Dedicated retail bonds, such as those sold by Portugal and Belgium, help non-professional investors avoid market volatility losses, offer tax benefits, and make purchases easier.
In France, millions of savers deposit their money in special accounts and make payments regulated ratethe demand is coming from the banks themselves, said Cyril Rousseau, head of the Debt Service.
Deposit-holding institutions are buying French inflation-linked bonds to generate the 3% interest rate they pay to savers, part of which is indexed to inflation, he said.
Domestic investors bought 63% of €3 billion French inflation-linked bonds Rousseau suggested most of the bond sales were “driven by the need to invest regulated personal deposits,” with the bank’s asset-liability management unit taking a 37% stake.
Eurozone households’ government debt holdings range from virtually zero in Germany to a high share in Portugal. The ECB’s findings have come to light.
Savers aren’t expected to replace the multitrillion-dollar fund that buys most of government debt, but they could be a powerful buffer in times of crisis.
Sabers also bought a record 5.7 billion Belgian government bonds in December 2011.
“After the issuance, spreads recovered very strongly,” Post said, referring to the additional borrowing costs Belgium would pay Germany.
“That was also one of the reasons we kept the product on the shelf, even though the level was very low and the public interest was very low.”
Spanish Savers Buy Treasury Bills https://tmsnrt.rs/3JsAvnL
Belgian savers buy national bills again https://tmsnrt.rs/44ib4NH
(Reporting by Jörg Bacheli, Editing by Darla Ranasingha and Hugh Lawson)
((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters messaging: firstname.lastname@example.org))
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