Czech Republic to issue EUR 401.4mn retail bonds in 2011.

By bne IntelliNews December 3, 2010
The finance ministry plans to make a pilot issue of government bonds for households and non-profit organisations in the amount of up to CZK 10bn (EUR 401.4mn) in 2011, according to the debt financing and management strategy for 2011. The issuance of the retail bonds will start in the second half of 2011 in order to test small investors demand and the technical functionality of the selected distribution channels. Full-scale operation of this kind is planned for 2012. In terms of maturity, two basic types of bonds will be offered the first one with a maturity of 1-2 years and the second one with a 5-6 years maturity. The nominal value of the two types of bonds will be CZK 1 per unit and the minimum amount per purchasing offer would be CZK 1,000. Neither of the two types of bonds will be traded on the Prague Stock Exchange or offered tax preferences. The yield on the bonds with 1-2 years maturity will be set on the basis of the discount rate, while that on the bonds with 5-6 years maturity on declared fixed or variable interest rate. During the presentation of the debt financing and management strategy, finance minister Miroslav Kalousek underlined that the retail bond issue was not due to shortage of other funds . The long-term objectives of including retail bonds among the permanent state funding instruments are presenting an opportunity for safe and advantageous investments in state debt for retail investors and diversifying the investor base; strengthening the governments fiscal responsibility through a direct financial relationship between citizens assets and the states liabilities as a counterbalance to the existing tax relationship; and expanding the range of products available for capital pillar of pension saving scheme in line with the proposed reform of the pension system. The ministry intends to distribute the retail bonds through participants of the Central Securities Depository but also will analyse the possibilities to use alternative distribution channels, particularly the CzechPoint network of contact points and electronic distribution.

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