With five issues of government debt securities, for which small investors who subscribed to most of all issues, both national bonds and treasury bills, were quite heated, many hoped that the capital market finally gained the necessary momentum. However, the latest July bond issue somewhat deflated that hope. Namely, after last year’s issue of national bonds was collected exclusively by small investors, literally not a crumb was left for large investors, this year’s government debt showed that the migration from banks to the capital market is still not a trend.
Probably less due to (non)trust, more due to the longer investment term (last year’s issue was for two years, this year’s is for three years) and a leaner interest rate (last year’s was 3.65 percent, this year’s is 3.3). Although the conditions are somewhat less attractive, they still yield more than bank interest rates, and in addition, investing in government securities, unlike buying stocks, is almost completely safe.
Analyst and investor Neven Vidaković concludes that the issue of national bonds has gone well. – It has been shown that citizens have gotten used to the process and that buying government bonds has become routine. The second dimension is the fact that the state did not collect as much as it wanted. The state itself is to blame for not offering an appropriate price. The minister treated citizens as institutional investors, and they are not. Currently, the yield curve is inverted, which means that short-term interest rates are higher than long-term ones. Such a situation means that it is normal for institutional investors to accept an interest rate of 3.5 percent for one year and an interest rate of three percent for five years. Citizens do not function that way. They always seek a higher interest rate for a longer maturity. Let’s say this is not a big mistake, and now that it has been noticed, it will certainly be corrected in the next offer – Vidaković is convinced.
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Niko Maričić, head of the fund management department at InterCapital Asset Management, says that the trend of turning to the capital market is certainly positive as the issues of national bonds have activated part of the population that probably would not have accessed the capital market but would have left their money in the bank.
– Although we are talking about one of the most conservative securities, we can say that the initial step towards accessing the capital market has been made, and the population has learned something from this. I certainly note that this should not stop here, but financial literacy of the population should continue. For someone who has taken the first step into the capital market with a national bond, the second step can be a leap towards more sophisticated classes of financial assets such as investment funds, ETFs, or stocks. Why was interest in the last issue lower? More factors influenced this, but I would single out the longer maturity as the main argument since we suggest to the population that after purchase, they hold national bonds until maturity. I believe that some people are not comfortable setting aside funds for such a long term.
The second argument is the lower interest rate, which in the end is not that much lower, 3.3 percent compared to 3.65 percent in the previous issue. However, the population believes that for a longer term they bear a higher risk, so the reward for that investment, the interest rate, should be higher. Of course, in the conditions of an inverted yield curve that we are currently witnessing, interest rates on shorter-term instruments are higher than interest rates on longer-term instruments, and this is not easy to explain to the population. I believe that the interest rate on the last issue was market-determined and that it is a fair value. I stand by the view that a shorter maturity would have resulted in greater interest – says Maričić.
