After Luxembourg’s defence bonds sold out within 24 hours in January, Finance Minister Gilles Roth on Wednesday suggested that similar debt raising efforts aimed at retail investors could follow this year.

Responding to a parliamentary question from CSV MP Diane Adehm, Roth said that a “housing bond” is already something the government has considered. It would be a short-term initiative with “attractive interest rates” and could raise anything between €150 million and €250 million, Roth said.

Win-win situation

“This could be launched before the end of this year or early next year. New civic bonds would be a win-win situation, especially for citizens,” claimed Roth.

In an interview with the Luxemburger Wort in January, Roth first revealed that parliament had suggested that a similar model to the defence bond could be used “as a savings instrument for private households that could be invested in national housing programmes.”

In her question, Adehm also mentioned using a public bond to help finance Luxembourg’s ecological transition.

Bonds are a form of debt that the Luxembourg government pays annual interests on and needs to pay back in full at maturity. Luxembourg already issues regular bonds to fund the gap between its tax intakes and expenditures.

Luxembourg is currently running a €1 billion deficit, but has pledged to increase defence spending as part of a Nato agreement.

More than 2,300 investors

The defence bonds attracted 2,380 retail investors with an average age of 58. Close to all of them – 96.7% – were Luxembourg resident taxpayers and could therefore benefit from a tax exemption on interest income, Roth said on Wednesday.

Defence bonds breakdown by size of investment

• 15.4% of investors invested less than €10,000

• 41.8% between €10,000 and €50,000

• 24.7% invested more than €50,000

• 17.6% invested the maximum amount of €150,000

The minister said, however, that because the press was so quick to report on the closing of the bond after it sold out within one day – discouraging citizens from contacting their banks to express their interest – it was difficult to estimate the volume of potential oversubscription of the bond.

He also suggested that raising the threshold for each investor from €150,000 to €250,000, or even the absence of any threshold, could have made it possible to mobilise more “private banking” clients capable of investing larger amounts.

Based on feedback consolidated by the Treasury, under the same conditions up to three times more than the original €150 million could have been raised for military and related infrastructure development.