Romania's Finance Ministry will launch on Monday, February 4, three new issues of government bonds for households, with maturities of 2, 3 and 5 years.

The bonds pay annual interest rates of 4%, 4.5%, and 5% respectively. The issues will be opened over a three-week period, until February 22, local Profit.ro reported.

The ministry confirmed that such issues will continue throughout the year, with opening periods of three weeks. The maturity of the papers will be set “in accordance with investors’ interest”, namely depending on the success of past issues.

"There have been such issues for households last year as well. Interest paid on these government bonds isn't taxed, it is a safe investment for households, we want to give the population alternatives to bank deposits," finance minister Eugen Teodorovici explained in a TV show at Antena 3 news station.

Indeed, for the three-year maturity, foreign banks (that enjoy robust financing from parent groups when needed) pay some 2% interest, while local bank Banca Transilvania that enjoys less access to such external financing pays 3.5%. Furthermore, the interest earned on a bank deposit is subject to taxation (10%), which is not the case with the earnings derived from government bonds.

The Government has visibly moved to launch more bonds to population amid on-going tensions with the banks. In fact, the Government will pay households more than it paid to banks in January, when the average yield for an issue with 34-month residual maturity was 4.04%. However, later in the same month, it was not able to raise the target amount in an issue with a residual maturity of 65 months (some five years) despite paying an average yield of 4.73%.

The Government will rely on using its six-month cash buffer and not pay the high yields asked by banks, minister Teodorovici said. The Treasury rejected all the offers submitted by the banks the next day in a 152-month issue, but the Government can't totally discontinue borrowing from banks for a longer period of time without paying even higher costs when returning to the market.

editor@romania-insider.com

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