March 5. 2024. 3:12

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Croatia launches subscription to a novel €1 billion ‘popular bond’


On the so-called “popular bond,” a type of government debt instrument open to private individuals, was launched by the government Wednesday morning, meaning Croatians will have the opportunity to invest for the first time a minimum of €500, with a 3.25% minimum yield for the two-year paper maturing in 2025.

The government expects the bond to raise around €1 billion in total through two rounds – in the first phase, scheduled until 1 March, any individual can invest at some 500 local branches of five major commercial banks participating in the project. After that, the bond will be offered to lenders themselves.

The bond was advertised in the media as one of the safest investment instruments, with the government expecting that the 3.25% guaranteed annual yield would attract many Croatians, considering that interest on deposits offered at commercial banks hovers below 0.3%.

The proceeds will likely be used to finance a €1.5 billion bond issued in 2017 set to mature in November this year, while central bank estimates from October 2022 say that Croatians currently hold at least €35 billion in their savings accounts.

Both Finance Minister Marko Primorac and Prime Minister Andrej Plenkovic invited the public to buy bonds on Wednesday, adding that they would invest in them.

“This is an opportunity to invest, which offers better conditions compared to merely putting it in a savings account at a commercial bank. I believe that the demand will be quite high,” Plenkovic told reporters on Wednesday.

Analysts say that the bond might provide an impetus for the local investment market and that withdrawing funds from savings accounts might indirectly help ease the historically high inflation rates and the rising housing prices. Others warn that the value of the yield might get eaten away unless the inflation, estimated at 13.1% in December, drops significantly in the coming months.

According to local media, no significant crowds were observed at bank branches in Zagreb on Wednesday, although some lenders told reporters that they had received more calls from people asking about the novel bond.

(David Spaic-Kovacic | EURACTIV.hr)