Mediafax (Mediafax)
Bonds  |  December 02, 2010 18:50:05

Bonds for households will be similar to term deposits


Mediafax

PRAGUE (MEDIAFAX) - Bonds for households whose release on Thursday, announced by the Ministry of Finance, will be similarly financially attractive as term deposits of private banks. This follows from a comparison of current Czech bonds with banking products.

Bonds, according to the Ministry of Finance in the first phase should be available in the banks with which the Ministry of Finance agree on cooperation. What is certain is that it will be available two types of bonds: long and short term.

Long-term bonds will have a maturity of five to six years and will bear interest at fixed or variable interest rate. This rate only provides the Ministry with regard to current market conditions.

For those who would be interested in such bonds, which means that after they would be able to purchase each year until maturity have to pay the amount derived from the interest rate. Ministry of Finance but also envisages the possibility that the amount obtained by citizens in interest could in turn invest in other bonds, which would maximize their yield.

Upon expiration of the person receiving payment amount per bond at the time of purchase spend. His reward for that state money borrowed would be paid annually yield.

The value of a bond will be a crown, with a minimum subscription amount permitted to be 1000 units, ie, the minimum investment in bonds is 1000 crowns.The annual return will of course depend on the interest rate, but the current government bonds of similar maturity, according to the Czech National Bank (CNB) moving at similar levels as term deposits of private banks, around one percent per annum for one-year bonds and about 2.5 percent the five-year bonds.

Ministry of Finance also announced that the purpose of, inter alia, to expand investment opportunities Czechs. "Our goal is to expand the market and not distort it," said Finance Minister Miroslav Kalousek (TOP 09). This suggests that the government seems set parameters comparable to other products on the banking market.

A very similar situation in the short-term bonds, whose maturity will be one to two years. The difference against long-term bonds is that the income from them will no longer be reinvested, iefor them to buy more bonds. One gets to the payment of principal and income.

Ministry of Finance plans to issue bonds next year for a household in the amount to ten billion. It will be a pilot issue, to test the interest of households in this financial product.

Minister Kalousek sure that these bonds will also see people later in the third quarter of next year. Until then, it will be media information campaign to acquaint the Czechs aim of the project and with everything you will need to know, such as the date of issue of bonds, etc. Take full project should start up in 2012.

George Taborsky, taborsky@mediafax.cz

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