The Catalan Government issues 3,700 million euros in one and two year retail bonds

Barcelona (ACN).- The Catalan Government began issuing retail bonds on Monday in order to fund its debt. The bonds are to be bought by private citizens through bank branches in Catalonia. After the first day, the purchase rate is even better than the most optimistic forecasts, according to different financial sources. Some of the participating banks had sold 20% of the total bonds they have been assigned after the first day. The Catalan Government is offering 3.7 billion euros in bonds, which might be increased up to 4 billion euros depending on demand. Individual citizens can purchase between 1,000 euros and 2 million euros, from Monday until November 14^th. Citizens can buy two types of bonds: those expiring in one year and those expiring in two; the first kind have an interest rate of 4.75% and the second type 5.25%. According to the Catalan Minister for Finance, Andreu Mas-Colell, these retail bonds are a “safe and attractive” operation, as the Catalan Government is “a solid” entity. Government Spokesperson, Francesc Homs, stated on Monday that the bonds are “a very good opportunity” and “a fine business” for citizens, as it is a “safe and guaranteed” investment with high profitability. In addition, Homs stressed that by buying bonds, citizens not only participate in a profitable financial operation but help the Government out by finding financial resources, now that financial markets are particularly difficult for southern European economies.

As planned some weeks ago, the Catalan Government issued retail bonds once again. It will be the third time in its history; the third in the last 12 months. The previous Left-Wing Government issued 3 billion euros in retail bonds in October 2010, expiring in November 2011. The operation was a complete success as bonds were massively bought by citizens. Last April, the new Catalan Government, run by the Centre-Right Catalan Nationalist Coalition CiU, issued retail bonds once again. This time 3.2 billion euros were offered and citizens could buy one-year and two-year bonds. The operation was also a success. Since the bonds from the first issue expire on November 21^st, the Catalan Government decided to issue new bonds once again, confirming this method as a regular source of cash for the Government.

The interest rates currently offered are slightly higher than previously planned, since rating agencies are downgrading the Spanish Autonomous Community debt rating. However, according to the Catalan Finance Minister, former Harvard professor Andreu Mas-Colell, they are “not relevant” since the rating agency decisions are mainly “conditioned” by the current international financial situation, and not so much focused on the particular situation in Catalonia. Mas-Colell defended last Friday, during a conference with entrepreneurs organised by Barcelona’s Chamber of Commerce, that the Catalan Government is “a solid” entity. Therefore, buying Catalan bonds is “safe” and “attractive”, considering the interest rates.

The one-year bonds will have an interest rate of 4.75%. Those of two years, an interest rate of 5.25%. In addition, the participating banks will add their own commission, which will range between 2% and 2.2%. 27 independent financial entities are participating in this new operation. According to different sources from some of the participating banks, both types of bonds are being bought at equal levels. The same sources indicate that the first day has been a success and some entities have already sold 20% of the bonds they had been assigned. Bonds can be bought from Monday to November 14^th. Citizens will have to make the payment on November 21^st, coinciding with the day the Catalan Government has to pay back the bonds and the interest from the first issue. Therefore, citizens who bought bonds last year, can use this money to buy new ones this time.