stated today in Redgate Capital’s overview of Estonian and Baltic bond market.
Unlike our southern neighbours, Estonia is lacking an active bonds trading market, said the Board Member of Redgate Capital Aare Tammemäe. Bonds are being kept until redemption and they do not move through the stock exchange but from hand-to-hand. “Mainly corporate bonds with higher credit risk are being issued in Estonia, or bonds for various projects. Unlike Latvia and Estonia, we do not have government bonds, because local authorities can get money more favourably from the banks and the state does not involve money from the bond market,” added Tammemäe.
However, the bond market is considerably more active than it was in the previous year. In 2013, 13 companies and one local government issued bonds that amounted 95 million euros. The biggest emission was from Sharp Investment in total volume of 39 million euros. The only local government that issued bonds, was the city of Tartu with 19.7 million euros. The bond that had the largest amount of investors and the longest duration (8 years) was LHV Group’s bond.
New investors are not looking for high yields.
According to Tammemäe, there is a small amount of Estonian institutional investors and bonds are mainly purchased by Estonian, but also Latvian and Lithuanian, wealthy private investors. “There is a new group of private investors who are not spoiled by the high returns, and who earn higher salaries, take out dividends and look for alternative ways of placing the money rather than bank deposits and real estate investments,” explained Tammemäe.
Tammemäe said that the situation in Estonia is favorable for further development of the bond market in Estonia, because the interest rates are low. “Bond is an appropriate financial instrument for both the person with an average salary and entrepreneur, but today there are no suitable bonds in Estonian market for them, for example state or state business’ bonds with low risk. These bonds would also be good investments for pension funds. We can see something similar coming to Estonian market in the nearest future, likewise it happened in Latvia and Lithuania,” commented Tammemäe on the potential of the market.
State bonds helped our southern neighbors.
Latvian and Lithuanian bond markets are much more active than Estonian. “State bond market has been successfully operating for decades, and for this reason our southern neighbors are one step ahead of us in developing their capital market,” explained Redgate Capital’s Project Manager Andrei Zaborski.
This year, the Republic of Latvia has organized two emissions with the volume of 2 billion euros and the Republic of Lithuania one international emission with the volume of 500 million euros. In all cases, the bonds were listed on the Luxembourg stock exchange.
One of the few Estonian international bond market issuers, Estonian Energy (Eesti Energia), increased its loan volumes in the beginning of the year. 100 million more euros were added to already existing emission, which increased the total issue volume to the 400 million euros.
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