T-bills open up to everyone
The government is restoring the opportunity for small private investors to take part in an interest-bearing bond auction, ending the scenarios for the issuance of a public bond.
Through Wednesday’s auction of interest-bearing 52-week treasury bills, amounting to 625 million euros, the state is providing individuals with the chance to purchase these securities through public registration, with a maximum nominal value of €15,000 per person.
As usual, the auction will be competitively bid by the principal negotiators, with their rules of procedure allowing them to submit non-competitive bids on the day of the auction. Non-competitive bids will be satisfied at the price of the last bid accepted at the auction, up to a total of 30% of the auctioned amount – i.e. up to €187.5 million.
However, in contrast to what was done before, no additional non-competitive bids will be accepted on the second day after the auction – i.e. on Thursday, which would also be up to 30% of the auction amount (€187.5 million) and would bring the total pumping amount to €1 billion.
This starts the process of reducing interest rates – something that was already a priority for the Public Debt Management Agency as soon as the country returns to investment grade – while at the same time creating space for the participation of small investors, which if it exceeds €187.5 million will be satisfied fully. The buying public, however, is not particularly large, as most of the deposits, around 75%, are below €1,000.
At the most recent one-year interest rate auction held in June, the yield was 3.84%, and according to estimates the yield on the new interest could be in the region of 4%, well above banks’ deposit interest rates. Bank of Greece figures show that the average interest rate on time deposits (with a maturity up to one year) stood at 1.50% in July, as banks have passed on to depositors a very small percentage of the cumulative increase in interest rates, which reaches 425 basis points.
Notably, interest is not subject to tax, while time deposits are taxed at 15% on interest.
